Citi Private Bank recommends major changes in clients’ investment portfolios amid today’s unprecedented conditions
Citi Private Bank today released its Mid-Year Outlook 2020 report, Investing in a New Economic Cycle. Released twice yearly, this edition calls for major changes to client portfolios as a new economic and market cycle begins.
Citi Private Bank expects a more rapid economic rebound than many others. However, the report stresses that this is no ordinary recovery; just as the COVID collapse is no ordinary recession. Large disparities in various countries’ economic growth seem likely owing to significant differences in national stimulus efforts. Greater exposure to trade and tourism is also likely to see certain countries bounce back more slowly.
“The global investment landscape has changed dramatically as a result of the pandemic,” said David Bailin, Chief Investment Officer, Citi Private Bank. “We expect massive dispersion in potential returns between regions, industries, and countries as the world transitions from fear to prosperity. The impact of unprecedented stimulus measures upon valuations has also prompted us to review our long-term asset class return estimates. We think these call for a new approach to building portfolios.”
Following the markets’ powerful rally since March’s lows, Citi Private Bank notes that beaten-down bargains are less widespread than in previous new cycles. That said, the Mid-Year Outlook report identifies many markets and assets with greater rebound potential. Among them are emerging markets, small- and mid-cap equities globally, and certain “COVID cyclical” sectors (including banks, real estate and traditional retail) that were hard hit and will be impacted for longer due to the pandemic-driven shutdown.
As a result of the substantial drop in interest rates and Fed Policy, Citi Private Bank calls for significant changes to long-term asset allocations. Many bonds may no longer help diversify portfolios as they previously did. Instead, the report highlights other possibilities for seeking diversification. It also emphasizes the importance of putting excess cash to work and then staying invested for the long term.
“We encounter many investors who believe they have ‘missed the boat’ after the rapid gains in markets since March,” says David Bailin. “As a result, they are sitting on excess cash, hoping for another opportunity to invest at lower levels. Mid-Year Outlook 2020 not only highlights the folly of such market timing attempts, but also sets out many opportunities for putting cash to work as this new cycle begins.”
At the same time, Citi Private Bank reiterates the importance of ongoing exposure to some of its existing investment themes. Many of the sectors that have outperformed during the pandemic were those it had recommended in 2018 and 2019. The included sectors related to “Unstoppable Trends” such as digital disruption, the shift in economic power towards Asia, and increasing healthcare demand from aging populations.
The full report, a summary version, short videos, and other materials can be accessed via the Citi Private Bank website here.
About Citi Private Bank:
Citi Private Bank is dedicated to serving worldly and wealthy individuals and families, providing customized private banking across borders. With around $500 billion in total client business, the franchise serves clients across 50 cities in over 100 countries. Citi Private Bank helps clients grow and preserve wealth, finance assets, make cash work harder, safeguard assets, preserve legacies, and serve family and family business needs. The firm offers clients products and services covering capital markets, managed investments, portfolio management, trust and estate planning, investment finance, banking and aircraft finance, art advisory and finance, and sports finance.
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