Coffee Break 1/18/2021


  • The vaccine roll-out in the UK has occurred earlier and faster than elsewhere in Europe. This is welcome news for a country facing a double-dip recession and a more contagious virus strain.
  • In the last ECB´s minutes, the central bank highlighted both the strong support for the announced package and concerns about the economic outlook and low inflation.
  • Political news dominated European headlines as Dutch PM Mark Rutte resigned, Italian PM Giuseppe Conte faces a key vote in the Senate and the ruling German Christian Democrats (CDU) elected Armin Laschet, a popular liberal as new leader on Saturday.
  • The US House of Representatives voted by 232 votes to 197 to impeach Donald Trump for allegedly inciting the rioters who stormed the Capitol. The Senate will now hold a trial to determine Donald Trump‘s guilt.



  • Joe Biden will become the 46th US President on Wednesday. The US may re-join the Paris Agreement on day One. An additional massive COVID-relief fiscal package is also expected.
  • China will release GDP growth rate figures for Q4 2020. All G20 countries but China registered a contraction in 2020. Forecasts point to 2.1% annual growth, confirming China´s leading position.
  • Key countries will release January Flash PMI´s. Given the renewed COVID-related restrictions in many places, manufacturing activity should still show a stronger recovery than services.
  • The ECB will meet to review its monetary policy. No decision on interest rates is expected, but the spill over of rising US bond yields and a stronger EUR are getting more and more attention.


  • Core scenario
    • In our central scenario, we take into account the slower than expected vaccine rollout and the unfortunate virus mutation, which might delay herd immunity. The current circumstances do not call into question the mechanical rebound of growth followed by a transition supported by central banks and governments towards a sustainable recovery in the Western hemisphere. H1 2021 will see a strong growth in corporate profit.
    • In the US, president-elect Joe Biden and his White House administration will have the advantage of a unified Congress thanks to the outcome of the Senate elections in Georgia. The prospect of additional stimulus after the Democratic sweep improves the investment horizon. The first 100 days in office may also tell how ambitious Biden will be on federal climate action.
    • In Europe, our central scenario assumes the end of social distancing in 2021 and a swift implementation of the Next Generation EU plan. Germany will elect a new Chancellor in the autumn ending thereby the Merkel era after 16 years.
    • Our main convictions remain as follows:
      • The economy is driven by the virus, and the mutations represent a blow. Markets are driven by the vaccine and the inoculations are the game changer.
      • We have an exposure to recovery-related assets: Overweight Equities Vs. bonds, European and US banks, US small and mid-caps, UK mid-caps and GBP.
      • Simultaneously, our core portfolio remains geared towards the most resilient themes and countries while keeping protections on the European equity market.
  • Market views
    • The progress toward a COVID-19 vaccine prompted investors to rotate from the “stay-at-home” stocks to companies that benefit from the economic recovery, i.e. cyclical and value sectors. The rotation is likely to continue into H1 2021.
    • From a longer-term perspective, ultra-accommodative fiscal and monetary policies and the vaccine becoming a reality should support the transition from a mechanical rebound to a sustainable recovery of the economy.
  • Risks
    • In the short term:
      • The coronavirus pandemic is the main obstacle to the economic recovery. The vaccine rollout appears underwhelming so far and the recent mutation of the virus could lead to increased efforts to reach herd immunity later this year.
      • US presidential transition. Joe Biden will be inaugurated on 20 January 2021. Prospects of more government debt push investors away from Treasuries, as the curve steepens with the ten-year yield floating higher.
    • In the long term:
      • Political uncertainty: The social divide is widening between losers and winners of the health crisis.


The 2021 recovery shall be accompanied by a catch-up in growth and a rebound in corporate earnings. We are overweight equities but with a protective derivative strategy on European equities to protect against potential short-term market volatility. We keep a positive assessment for European and Emerging equities, value sectors, such as banks, and US and UK small and mid-caps. There is also a positive assessment for the long-term winners of the sanitary crisis: Technology, Health care, and Green Deal beneficiaries, among others. Riskier bonds enhance the strategy. 2021 will require continuous active management and agility.



  • 2021 shall be a recovery year and as we anticipate a strong first half, we prefer equities – less expensive than bonds despite high valuation.
    • We are overweight EMU and UK equities. We remain overall neutral Europe ex-EMU. European equities will benefit from the turn in market drivers vs. pandemic.
    • We remain overweight emerging markets equities and have a preference for the Chinese equity market. China emerges stronger, especially as the US are going through such tumultuous changes, as we enter 2021.
    • We are neutral US equities, with a preference for US banks and small and mid-caps.
    • We are also neutral Japanese equities.
    • We keep key convictions in various thematic investments. Global Technology, Oncology and Biotech sectors prove relatively resilient in the current context and reveal high growth potential driven by innovation and pricing power.
    • We believe that climate and environmental themes enable exposure to key solutions for a cleaner future and will continue to gain in importance as infrastructure plans are becoming green, from China to Europe, and also the US under a Biden administration.
  • We are underweight bonds, keeping a short duration, but highly diversified as the current environment is also creating opportunities in the bond market, including in convertible bonds.
    • We are underweight core government bonds and overweight European peripheral government bonds.
    • In a multi-asset portfolio, we focus on the source of the highest carry, i.e. emerging debt. We are neutral US and European investment grade credit.
    • We hold GBP, having reached some of its lowest levels since the Brexit referendum. We hold NOK, which appeared attractive during the crisis, as well as gold and the JPY, which are risk mitigators. We remain cautious on the US dollar.