The finding has come from the newly published Natixis Strategist Outlook survey, which has shown although investment experts across the organisation share a relatively optimistic economic outlook, the broad consensus is that a full recovery from the COVID crisis will take time.
The report has referenced 36 strategists, economists and portfolio managers representing Natixis Investment Managers, 14 of its affiliated asset managers and Natixis Corporate & Investment Banking.
A COVID second wave topped the list of concerns for the respondents, followed by US/China trade tensions and the upcoming US elections, although strategists were generally unconcerned about the market risks posed by foreign interference in the polls.
The majority (86 per cent) have given the pandemic the leading high-risk rating (above five) for an average risk rank of 7.5, as the northern hemisphere moves into autumn and towards flu season, while the threat of a second wave looms. But beliefs are split on the consequences of the pandemic on risk assets for the coming months.
Esty Dwek, head of global macro strategy, solutions at Natixis Investment Managers commented: “While there is consensus across the group that the road to recovery will be bumpy, it’s certainly not clear which way the markets will go into the end of the year.
“What we do anticipate as we move towards the US elections is increased political volatility and, not uncharacteristically, election drama.”
Biden ranking better for trade, risk – but reception uncertain
Although the majority of strategists predict Mr Biden will win the US presidential election, there was concern over how any result is received by the American public.
Half of Natixis experts (50 per cent) expect the outcome will be contested regardless and half predict the election will result in social unrest.
While the majority believed a Biden presidency will be better for global trade (75 per cent) and geopolitical risk (75 per cent), more than half of the experts (58 per cent) stated Donald Trump’s re-election would be better for equities, given prospects for lower corporate taxes and a pro-business perception.
For bonds, the strategists were reported to offer little opinion, likely reflecting the view of the Fed and the perception that rates will be lower for longer, regardless of who sits in the Oval Office.
Looking at the economy post-COVID, one-third of the strategists signalled they anticipate a W-shaped recovery, in effect projecting another economic decline despite the fiscal and monetary support provided to date.
The sentiment was shared by respondents who anticipate a rally (47 per cent) and those who see a sell-off (53 per cent), making the second dip a question of when, not if, for them.
Nearly half (44 per cent) believe that while recovery is underway, the initial impetus is likely to stall. Despite the stock market’s rebound, few experts (2.8 per cent) anticipate the economy would follow suit.
ESG comes out on top
Technology was marked as a clear market winner, alongside healthcare, with 94 per cent of Natixis participants expecting the sector to become stronger for policymakers going forward, while working-from-home businesses were a close third (91 per cent).
However, the vast majority (91 per cent) also tipped ESG investing will become a winner after the crisis, after investment strategies in the space proved mostly defensive in the first half of the year.
Three-quarters of the group (75 per cent) believe ESG will become more prominent as a result of the COVID pandemic.
Traditional entertainment and travel were tipped as the top losers by 85 per cent and 83 per cent of experts respectively.
Energy, which already was facing challenges from the first quarter, was also voted as a likely loser by 77 per cent of survey respondents.
