Exposure rates of the Dorval Asset Management Range – 30th October 2020

After investors dealt with the shock of fresh lockdown announcements in Europe, all eyes are now on the United States, where the results of the presidential and Senate elections are eagerly awaited, while the extent of the country’s third Covid-19 wave is also being closely monitored.

After Donald Trump’s shock election victory in 2016, most US pollsters reviewed their methodologies, but even after these changes, surveys still suggest that Democrats are poised to win both the presidency and the Senate. If this turns out to be the case, then a stimulus program of at least $2 trillion would be waved through swiftly.


However, regardless of the election outcome, there will be severe pressure to roll out a fresh rescue plan in light of the surge in Covid-19-related hospitalizations in the country (cf. chart 1). Just like this summer’s second Covid-19 wave, the spike is focused on a limited number of states for now, particularly in the Midwest (Illinois, Michigan), but given the number of surprise developments in the pandemic so far, making any kind of projection is a challenging task.


Third spike in US cases
Number of Covid-19-related hospitalizations in United States




In the midst of the current uncertainty on the health situation, developed markets’ 3Q GDP figures offered considerable reassurance, as they recovered significantly to revisit stats that the OECD’s springtime projections had not expected until 2022 (cf. chart 2). Despite the series of economic restrictions to rein in health risks, these figures confirm that sufficiently extensive and long-lasting stimulus plans and rescue packages have the clout to drive the much hoped-for economic recovery. So there is definitely good reason to keep our hopes alive for the economic situation in 2021.



Economic activity recovered much more than expected after spring lockdowns
Base 100 in 4Q 2019

US GDP / Scenario expected by OECD in June 2020
French GDP / Scenario expected by OECD in June 2020


Meanwhile for investors, these figures put the disappointment triggered by lockdown moves in Europe into perspective. Economic activity is set to dip again in Europe in the fourth quarter of the year, but to a much lesser extent than in 2Q as restrictions are not so stringent, while experience suggests that the economy will then take a sharp upturn in the aftermath. The equity markets slid again (cf. chart 3), but the dent to the world financial markets resulting from fresh lockdowns is curbed by the fact that the virus remains under control in Asia, and is seeing a seasonal decline in the southern hemisphere (Australia, Latin America). Monetary and fiscal safety nets had already been set up, and are even being ramped up as the ECB recently noted. Lastly, vaccines are undergoing phase III trials and initial results could be published in November, so overall there are a number of substantial differences between March and the current situation.




Fresh lockdowns push down European equities again,
but rest of world is holding up better
Base 100 January 1st

MSCI Emerging Markets Index


In our portfolios, we will assess whether it is timely to increase our equity exposure depending on forthcoming events in the United States, among other factors. Our scenario still remains for a clear world economic recovery in 2021.





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