We expect the reduction in uncertainty following the US presidential election, the positive news on vaccines and the ongoing economic recovery to support equities.

We maintain our view that the upside is limited and government bond markets remain expensive, despite the recent rise in yields.

We have downgraded our view as we await better visibility on fiscal stimulus plans after the US presidential election.

We retain a positive view overall, with a preference for higher quality, “investment grade” corporate bonds over lower quality non-investment grade (“high yield”).

Following the recent rise in yields, US government bonds (Treasuries) are beginning to look interesting again as they may offer protection if growth disappoints.

We maintain our view that there is less value in UK government bonds (gilts) given their poor relative returns compared to other developed markets.

Germany remains a very expensive market and a strong euro creates an additional headwind for the European Central Bank (ECB). 

With inflation likely to remain significantly lower than target, the Bank of Japan will need to keep its unconventional policies in place.

Following the recent rise in yields, Treasury Inflation-Protected Securities (TIPS) now appear less favourable compared to Treasuries.

We still see medium-term opportunities which are likely to provide higher yields.

Fundamentals are weak, but the Federal Reserve (Fed) is expected to remain supportive by extending its purchasing scheme.

Although fundamentals are weak, demand is robust due to the ECB increasing its purchases back to levels seen in March and June 2020.

We continue to favour high quality corporate bonds. The level of real interest rates is likely to remain the key driver of this market.

US high yield (HY) is less attractive than European HY.

We retain our preference for European HY as we expect support from the ECB in the form of the pandemic emergency purchase programme (PEPP) to continue into 2021.

Given extreme market pessimism until the vaccine news, we believe there is now a valuation-driven opportunity, particularly in US energy.

Recent optimism on the vaccine combined with signs of an economic recovery and a normalising of activity leads us to maintain our neutral view on gold.

Although industrial metals could benefit from a recovery, China is tightening liquidity. Therefore, we are reluctant to upgrade given the uncertainty on fiscal stimulus.

Although we prefer to stay on the side lines for the time being, the sector is resilient due to demand from Chinese trade commitments.

We maintain a positive view on the US dollar as it offers defensive properties at a time when government bonds offer less protection against financial loss.

Although we remain neutral on sterling as we await the outcome of Brexit negotiations and the economic impact of Covid-19 lockdowns, there is a glimmer of hope on the horizon.

We maintain a neutral view on the euro as growth has deteriorated due to lockdowns. However, we expect that aggressive central bank support will help next month.

With the US election out of the way and positive news on vaccine efficacy, the outlook for the yen has weakened and for this reason we have downgraded our view.

We expect the Swiss franc to remain range-bound due to the better environment for risky assets compared with the European Covid-19 lockdown despair.