Exceptional volatility in asset returns through 2020 can sometimes hide the big picture, which is a very strong risk-off move over the year to date. Risk assets in general have posted negative returns, while safe assets have prospered. That remains true as a generalisation even though some risk assets have rallied — specifically, US equities. The strength of US equities reflects the huge stimulus from macroeconomic policy, both monetary and fiscal. And it also reflects the degree to which the US market as a whole is regarded as a safe haven in troubled times. Once the acute phase of this crisis is finally over, US equities look expensive and should under-perform compared to other risk assets.
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