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November 2020

MARKET PULSE | November 2020

Macro Views


Fatality rates have fallen despite case growth acceleration as infections have shifted to lower-risk groups and treatments have improved. A vaccine, however, likely remains key to achieving herd immunity and full macro recovery. The speed of vaccine acquisition and distribution, along with current output gap, are key determinants of a country’s GDP potential. We believe the US and UK will benefit the most in 2021, likely realizing an ~2% GDP boost. Read More


At 90% recovered, US GDP has seen the quickest recessionary bounce-back of the post-war era. But improvement remains uneven with entertainment, hospitality, and personal care spending recuperating less than 65% to date. The low odds of a stimulus bill passing this year has increased our expectation for a $1 trillion package in Q1 2021, providing a lifeline for corporates and households until a vaccine is available. Read More

US Election

As markets digest election results, we remind investors that election-related volatility is often short-lived. Historical equity fund flow data indicates that once clarity can be expected, a rotation into equities typically follows within two months. Ultimately we believe the US economy has often proven resilient to shifting political outcomes. Read More


Core inflation rates are likely to edge higher from currently low levels but remain within central bank targets. The recovery will likely push prices upward given 1) higher demand for front-line workers, 2) re-assessment of global supply chains, and 3) greater central bank appetite for above 2% inflation. Still, near-term deflationary pressures may persist as US wage growth remains subdued, unemployment may stay above 4.5% until 2024, and a greater emphasis on the tech economy should limit inflation broadly. Read More

Market Views


The secular trends that have supported growth-style equities over the past decade – i.e. low economic growth, low inflation, and low yields – are likely to continue over the next decade. But we see potential for a sharp value rotation in the next few months. A vaccine solution and more fiscal spending would likely support activity, yields, and the hardest-hit corners of the market. Read More

EM Equities

Emerging markets are still pricing crisis-level scenarios, with equities trading at a 50th percentile P/E discount to the S&P 500, despite more robust economic and earnings growth expectations for 2021 (6.6% vs 5.8%, and 35% vs 22%, respectively) and beyond. We think such dislocations may create opportunities at the company-specific level, especially for those that stand to benefit from a vaccine and pro-risk rally. Additionally, we recognize potential early signs of investor interest in the form of recent positive net flows. Read More


Risks remain skewed toward continued US dollar weakness due to its high valuation, countercyclical role in a recovering global economy, and deeply negative US real interest rates. We expect US dollar downside to broaden, with potential for underperformance versus EM currencies as well as G10 FX. Read More


Higher oil prices over the next 12 months will mainly be driven by recovering global demand and reduced corporate capex investments in our view. Potential policy changes may have a more near-term effect on demand (in the form of stimulus) and longer-term implications for supply (regulation). In terms of precious metals, though gold is poised to benefit from a continued decline in real interest rates, we believe its value as a hedge for inflation or equity drawdowns is ultimately limited. Read More

What’s Moving Markets?

COVID-19 remains the key source of uncertainty. With more than 50 million cases worldwide, the rise in confirmed case growth suggests that sustained virus control and economic recovery will remain challenging until a vaccine becomes widely available. So while political risks remain top of mind, we think the key drivers of today’s market have more to do with the virus, the vaccine, and the corresponding monetary and fiscal policy response. Each pose potential market catalysts with both upside and downside risks.

…likely requires a vaccine solution…

The importance of overcoming COVID-19 has led to asymmetric market risk around a vaccine. We are optimistic that one will be approved and available by early 2021, as there is an ~80% success rate for Phase 3 candidates. We think an early vaccine would accelerate near-term S&P strength as the cyclical and value-oriented sectors that were hardest hit may begin to outperform. However, if vaccine progress is delayed, equities may trade down to 2990.

Source: Superforecasters at the Good Judgement Project and GSAM.

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