To help investors understand the current state of assets under management in these markets, Mercer conducted its first asset allocation survey in growth markets. We favor cyclical, value, and emerging market exposures on increased confidence in the durability and broadening of the early-cycle environment. Earnings are poised to rise while the discount rate remains subdued, a function of the Federal Reserve’s structurally more dovish flexible inflation targeting framework. The pent-up demand that has some industries operating at or above pre-COVID-19 levels should fade, sharpening focus on the development of vaccines required to allow for the repair of more chronically afflicted businesses. for further information on what we can offer you, Macro Quarterly: Bridging the gap to a broader recovery. A number of the comments in the content of this webpage are considered forward-looking statements. Multiple prominent candidates are in Phase 3 trials. In aggregate, households have more than three months of excess savings to smooth lost wages (see Exhibit 4). The prospect of a severe, seasonal second wave of COVID-19 across the developed world could necessitate a return to lockdowns and reverse the economic progress since April. Within US equities, the fundamental tide is turning in favor of broader equity exposure compared to the tech-heavy Nasdaq 100. The information and opinions contained in the content of this webpage have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith but no responsibility is accepted for any errors or omissions. The November presidential and Congressional election may redefine the US fiscal outlook. Meanwhile, the number of investors across Europe reporting an allocation to hedge funds also fell, Mercer noted. Vaccine development and the ongoing fiscal response (which the upcoming US election may heavily impact) are the critical themes that will shape the timing and strength of the economic normalization process. Data as of 16 September 2020, Nasdaq 100 earnings, price outperformance should turn on recovery, reopening progress. We believe that vaccine progress and the fiscal thrust will drive the timing, magnitude, and longevity of the success in the early-cycle opportunity set. We expect emergency approval of one to three vaccines during Q4 2020, first by the US Food and Drug Administration (FDA) and then closely thereafter by European regulators, with more in the months to follow. The coming months should start to answer the lingering questions on these defining features of 2020. Mercer said its research shows that allocations to fixed income investments like corporate bonds over the last three years period have risen from 48% to 50%. One clear outlier is the lack of retracement to the upside in longer-term Treasury yields. Within equities, we prefer pockets outside of the US, in particular emerging markets. We expect full approval that allows for broad inoculation to begin by the middle of 2021.After emergency approval, a diverse cohort of vaccinated individuals must be monitored prior to full approval and general availability. We believe that income growth is likely to remain positive. It shows that the trend of reduced equity allocations is reflected more widely by investors across Europe and the UK, with the average equity holding falling to 22% this year from 25% in 2019. There has been a limited recovery in many of these currencies despite more signs of success in controlling the spread of the virus, and they continue to trade at compelling valuations. If there is a deal, it is likely to be substantial in size in order to encompass priorities from both President Donald Trump and House Majority Leader Nancy Pelosi. 2020 has been a year marked by astonishing economic and financial market volatility, and its final act will start to provide a welcome resolution. In addition, it should also catalyze the next phase of US dollar weakness in which undervalued, higher-beta emerging market currencies meaningfully outperform. Time is also necessary to overcome bottlenecks to production capacity for both the vaccine and its storage and distribution components, such as glass vials and refrigerators. Vaccine dissemination may also contribute to an uneven, gradual recovery across geographies, as access for emerging market economies outside of China and Russia is likely to lag that of developed nations. "We expect schemes to continue focusing on building more robust portfolios through increased diversification and better matching of the liabilities," he said. The distribution of lump sum payments in September to unemployed Americans as part of the Lost Wages Assistance program should also serve as an effective stopgap measure to buoy incomes and spending. Source: UBS Asset Management Investment Solutions Macro Asset Allocation Strategy team as at 17 September 2020. The impact of recent market conditions has resulted in a significant decline in funded status for many plans with a meaningful equity allocation. Data as September 2020. "In periods of high volatility, some investors may be ready to be more opportunistic as market dislocations often present an attractive entry point for those prepared to ride out short-term volatility," he added. We see a suite of attractive relative value opportunities across asset classes, with a preference for trades consistent with a broadening of risk appetite on enhanced investor conviction in the process of durable economic normalization. Plan fiduciaries should determine whether an investment program is prudent in light of a plan's own circumstances and overall portfolio. Our expected cyclical recovery is unevenly embedded across asset classes, based on the degree of retracements across financial markets relative to pre-COVID-19 peaks and the ensuing troughs. Source for all data/charts, if not stated otherwise: UBS Asset Management. Source: UBS Asset Management, Bloomberg. The rise in gold also has more room to run. An ongoing struggle continues between virus-induced impairments to economic activity and the powerful policy response continues to dominate the economic backdrop. As such, any success on this front would bolster the appeal of our preferred pro-cyclical, value positions in the equity market. Irish pension schemes have reduced their equity allocations by almost a third in the past three years as they diversify into fixed income and real assets - property and infrastructure - as new sources of returns. Mercer's 2020 European Asset allocation insights shows average equity allocations for Irish defined benefit schemes fell to 27% this year, compared to 39% in 2017. As individual situations may differ, clients should seek independent professional tax, legal, accounting or other specialist advisors as to the legal and tax implication of investing. The products, services, information and/or materials contained within these web pages may not be available for residents of certain jurisdictions. This approach is designed to amplify existing monetary accommodation as the expansion strengthens, which should cap real yields and weigh on the US dollar.

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