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Containing Covid and keeping the economy running: a veritable balancing act Update 28-10-2020

Covid is back again

The virus has not entirely unexpectedly started to spread again. Infection rates are exceeding the previous spikes in Europe, while the US has not been spared either.

It is no longer referred to universally as a lockdown, but the more stringent measures in many countries are a serious step in that direction. The experience gained earlier this year is positive and means that the economy can be kept running to the maximum possible extent.

Economic recovery losing steam

The economy picked up strongly following lockdown in the spring, but that recovery now appears to have ground to a halt. Moreover, the new stricter measures are starting to be felt.

The sectoral impact is highly divergent: business owners in the industrial sector remain optimistic, whereas confidence is clearly declining again in the service sector.

China continues to lead the way with its faster-than-expected economic recovery.

More cautious investment strategy

The climate on the stock market has continued to be positive in recent weeks. It is certainly not inconceivable that the weeks ahead could be slightly more turbulent, with slowing economic recovery, the resurgence of Covid, the possibility of disputed elections in the US and the pending issue of Brexit all having the potential to spoil the party.

For the time being, we are taking a somewhat more cautious approach towards shares and investing this component a little more defensively. Growth sectors, such as technology and pharmaceuticals, still spearhead the allocation, but to a lesser extent than before. The emphasis is now more on business sectors with stable activities, such as food producers and distributors.

In the bond component, we have gone for a combination of higher-yielding bonds issued by companies and southern euro-area countries, and safer long-term bonds issued by the German government.

Besides this long-term vision, protection and trends on the financial markets are important aspects too. Your personal investment, which you can see in KBC Mobile and Touch, may have a different composition that takes account of your comfort zone.

Dirk Thiels, Senior Investment Strategist KBC Asset Management
Weaker economic figures, Covid, a disputed election result in the US and the still pending issue of Brexit could well cause some turbulence on the stock markets in the weeks ahead. We prefer sectors that offer more security.

Editing ended on 28 October 2020. This document is a publication of KBC Asset Management NV (KBC AM). The information in it can be changed without notice and offers no guarantee for the future. Nothing in this document may be reproduced without the prior, express, written consent of KBC AM. This information is governed by the laws of Belgium and is subject to the exclusive jurisdiction of its courts.