Multi Asset Fund Update from Aviva

By FMB on 

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Most of our clients have multi-asset funds of some description. Not everyone will have Aviva funds but we thought it was interesting to share their house view from Guillaume Paillet,

You can watch the video interview with Guillaume here. or read the summary below

Week in review


• COVID-19 continued to dominate headlines in what was a mixed week for equity markets.
• The worrying trend of higher cases in the US continued forcing California to close bars and restaurants and shut the doors on schools in its two largest districts. Death rates continued to rise in states which re-opened quickly most notably Florida and Texas while New York launched an ad campaign to encouraging everyone to wear facemasks.
• There was some cause for optimism however, markets were supported by news that a vaccine may be on the way with Moderna’s drug producing antibodies in all patients tested in an initial safety trial. Later in the week it was claimed that hackers backed by the Russian state are trying to steal vaccine treatment research from academic and pharmaceutical institutions around the world.
• As the Brexit deadline draws ever closer, the British Government this week set out some plans for how things will operate when freed from Brussels. In a 100-page white paper, the government outlined plans for a new ‘UK internal market’ which will kick in post Brexit. It was immediately condemned however by Scottish and Welsh political leaders who suggested it would destabilise the constitutional settlement between the four constituent nations.
• Some of the world’s largest banks reporting earnings this week. JPMorgan, Citigroup and Wells Fargo set aside almost $28 billion as a bad loan provision – a number substantially higher than analysts expected. On a more positive note the trading desks within these banks saw a surge in activity in Q2 which helped offset some of the disappointment.
• The share price of Tesla continues to catch headlines, early in the week the share price surged to almost $1,800 and it was reported that almost 40,000 accounts with Robinhood (a large US trading platform for retail investors) bought shares in the car manufacturer in a four-hour period. Although optimism declined as the week went on with a share price now at c$1,500 it is by far the world’s largest car manufacturer as measured by market capitalisation.
• Developed market equities were flat to marginally positive in the week while emerging markets gave up some ground as the surge in the Chinese equity market seen in the previous week reversed. Government bonds were broadly unchanged while credit markets posted modest gains.

Current positioning


• No significant changes were made to the Multi Asset Fund range during the week
• We remain concerned that the worst of the market falls are not yet behind us and we remain underweight equity.

Outlook

In light of the current conditions we continue to take a more cautious approach. Our rationale can be broken down into three key reasons:
1. Equity markets are up significantly from their lows. The recovery does not justify the current valuation levels we are now seeing within equities given the uncertainty in terms of the current and pending economic and social ramifications of the impact of the pandemic.
2. We currently do not know enough about the potential progression of the virus. We have feared that the virus may take some time to get under control and there was always a risk of a second wave. Some of these fears have unfortunately been realised in recent weeks with the increased surge in cases in the US and ad hoc additional lockdowns throughout the globe.
3. Execution risk of the fiscal support packages and consumer appetite. The money may not get to where it is needed the most or more money may be required than initially expected. We also need to watch closely to see if those who receive support spend money in order to stimulate growth.

We will be watching developments closely and keep looking for opportunities. For now, however, we are comfortable with more defensive positioning.

Blog content from Aviva.

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