Climate Risk and the Data Revolution
A revolution in data mapping the effects of climate change has created opportunities for investors.
The first half of 2020 was marked by uncertainty and tumult stemming from the COVID-19 pandemic, which left humanitarian and economic wounds across the globe. While measures to flatten the curve and revive the economy have started to heal those wounds, prospects for the future remain unclear. PGIM experts take an optimistic yet calculated approach in exploring ways to strategically navigate the times ahead.
QMA’s Global Multi-Asset Solutions team is taking a measured, selective stance:
“While monetary and fiscal policy support remain powerful drivers of the stock market rally, a correction from current levels or consolidation over the next few months seems likely before stocks experience another strong leg higher. We are currently not making big tactical bets, such as embracing an aggressive pro-growth strategy or a full-on defensive positioning, but instead sticking closer to policy benchmarks.”
Jennison Associates believes growth stocks will continue to lead the way:
“Some recent data indicate multiple ‘green shoots’ for both domestic and global economic activity, but 2020 top-down earnings projections remain uncertain. Consumers have altered their approach to daily life as work from home leads to greater e-commerce and entertainment engagement, with attendant needs for robust internet infrastructure. This has created bifurcation in the market’s winners and losers, lifting advantaged companies and industries to records and intensifying pressure on companies with dimmer prospects for recovery.”
PGIM Fixed Income sees opportunities along a bumpy road:
“We see a gradual recovery for the global economy, with the level of GDP picking up the second half of the year. Activity is unlikely to reach Q4 2019 levels until at least late 2021. Bonds appear set to perform reasonably well over the intermediate to long term, although the pace of the rally may slow along an increasingly bumpy road. Credit selection will be a key determinant of performance in the months ahead as the fundamental impact of the virus and the drop in oil prices take a cumulative toll on credit quality. The uncertainties and mixed liquidity conditions may offer above-average opportunities to add value through sector allocation, credit selection, and positioning in currencies and interest rates.”
PGIM Real Estate believes lessons for what’s to come for global real estate markets can be drawn from past downturns, although causes and effects are always different:
“Values are set to remain under pressure in the near term as a result of stress in occupier and investment markets — and the range of possible outcomes is wide — but there are some reasons for optimism. Portfolio strategy needs to strike a balance between a need for defensiveness given elevated near-term uncertainty, the prospect of a cyclical rebound generating value growth from a low base and opportunities arising from shifting structural trends.”
For the full Q3 market outlooks, webinars and summaries, visit PGIM’s market outlooks page.
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For Jennison Associates