Exposure rates of the Dorval Asset Management Range – 31st December 2020

2020 is drawing to a close on a series of positive notes:

-       An eleventh-hour trade agreement has been brokered between the European Union and the United Kingdom after four years of talks. An agreement on services – finance first and foremost – will need to be reached over the next three months.


-       After several months of negotiations, Republicans and Democrats have agreed on a new aid package equating to 4% of GDP, including checks to households of $600 per adult, which could be expanded to $2,000.


-       The Covid-19 vaccination program has kicked off in almost all developed countries, pointing to the possibility that economies will gradually open again over the first half of the year. At this stage, 19 vaccines have been approved and more than 5 million people have already been vaccinated, including more than 2 million in the US.


This has been an exceptional exercise in many ways. Despite running up against various difficulties and uncertainties, the equity markets ended on a strong rally in the US and Asia, and close to equilibrium in Europe, making for a surprise for many investors and reflecting the outcome of coordinated monetary and fiscal responses worldwide.


World economic activity is set to stage a sturdy rebound in 2021, which is heartening for both financial assets and the equity markets. However, the themes to be addressed shift as this outlook attracts more broad-based support. As we have often discussed, visibility is clear on the core scenario for a robust economic recovery from the second quarter of 2021, but investors have also well and truly priced


Investors are increasingly risk-inclined, boosted by vaccines
Composite risk appetite indicator – average of GS, Citi, AAII and NAAIM indices


The second half of 2020 ended up being fueled by a revival for manufacturing and traditional cyclical sectors, while the first half of 2021 is set to be driven by a recovery for services, which were hardest hit by the Covid-19 pandemic and still carry hefty risk premiums. Small- and mid-caps are also poised to offer attractive prospects during this period of renewed confidence.


We wish you all a very Happy New Year. We’ll be in touch next week to kick off the new year and steer a path through 2021 together!



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