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Despite the sharpest economic slump in almost a century, risk assets registered gains in 2020. In a year of restoration, a pro-risk stance still makes sense, although expected returns are likely to be lower for longer. With bond yields ultra-low, the case for “new diversifiers” in the portfolios is compelling, according to Zac Tate, Joe Little and Hussain Mehdi, HSBC’s Global Investment Strategy Team.

Key quotes

“In a year of restoration, allocating to equities still makes sense, but we will need to be dynamic in tilting between countries and regions. We also believe there are good opportunities in emerging markets fixed income – which should benefit from a weaker dollar and low US real interest rates – and also in a range of alternative asset classes such as private equity.”

“It is much harder to be confident allocating to global government bonds government bonds, which have become lower-returning and riskier than before. The case for ‘new diversifiers’ such as commodities, securitised debt and hedge fund strategies in our portfolios is compelling.”