Tactical Investment Strategy July 2020

The macro environment remains highly fluid with economic activity rebounding off historic lows and concerns building over a second wave of Covid-19 infections. Our thesis for the third quarter includes a continued recovery in data, but less surprises to the upside, and a continued commitment from policymakers to stay accommodative through 2020. This should keep the tone generally positive for risk markets, with equities volatile but not collapsing on bouts of negative news, and spreads well supported by Fed purchases and the lack of alternatives in a low-yield world. As such, our strategies are appropriately positioned for our outlook with a modest overweight in equities across balanced strategies and overweight spread sectors within fixed income. As the quarter evolves, however, we expect to begin toning down risk as valuations rise and to place an emphasis on security selection over broad beta risk.