Kleinwort Hambros: The long recovery

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Kleinwort Hambros issues its latest 'Monthly House Views', examining the financial markets.


Recent economic data points have painted a bleak picture of the short-term outlook. Business confidence has plummeted, particularly in manufacturing, and large numbers of workers have applied for unemployment insurance. In the US alone, over 33.5 million have filed new jobless claims out of a total workforce of around 152 million. Governments have sprung into action to provide support for companies (via loan guarantees for example) and for households (via direct grants, partial payment of salaries, or government-sponsored part-time working). With new confirmed cases gradually coming under control, attention is turning to exit strategies from the lockdown. However, restrictions on activity are likely to linger and recovery will take time. 

Central Banks 

With key rates already close to zero or indeed negative across advanced economies, central banks have stepped up their asset purchases in recent weeks. The US Federal Reserve (Fed) has removed the ceiling on its programme and added recently-downgraded issuers (“fallen angels”) and High Yield (HY) Exchange Traded Funds (ETFs) to its shopping list. The European Central Bank (ECB) has also ventured into HY by including Greece in its purchases, while removing restrictions on issuer and issue size to gain more flexibility. The Bank of England has cut rates twice, from 0.75% to 0.1%, and announced £200 billion of new quantitative easing, bringing its bond buying program to a total of £645 billion. In its May 7 meeting, an additional £100 billion of stimulus was seriously in play. 


The pace of CoViD-19’s spread has slowed to low single digits across the globe, enabling governments to begin to plan their exit strategies. Combined with enormous support from central banks and government spending, this has fostered a rally in risky assets such as equities. Although measures of investor sentiment like the VIX “fear index” have improved from recent extremes, they remain well above historical averages. Central bank asset purchases should provide direct support to fixed income markets. 

Bottom line 

Economic figures suggest a wasteland, with the expectation of even worse to come over the second quarter. On the other hand, global equities are technically in a new bull market. We remain defensively positioned and there is plenty to warrant caution. Since March, we have reduced risk across our multi-asset strategies and bolstered our defensive allocations by purchasing more government bonds. We will maintain current positions or adjust our asset allocation as guided by the pillars of our investment process: economic climate, valuations, momentum, and sentiment.

Please click here to download  KH House Views May 2020

For more information, please contact Sam Hartles, Private Banker sam.hartles@kleinworthambros.com


Kleinwort Hambros has a wealth of experience in helping individuals, families, entrepreneurs, charities and their advisers to manage their financial assets, whether they are based in the UK or overseas. At Kleinwort Hambros we know how to simplify life’s financial challenges. We also understand the importance of creating a strong relationship with our clients. Driven by shared values of team spirit, commitment, responsibility and innovation, all our teams are focused on delivering a truly personal service. All our staff, regardless of their role, helps create better, deeper, more personal relationships with our clients, while offering them a greater level of service and opportunity.

We offer a wide range of services through an holistic approach based on trust, service and expert knowledge. Every client is unique. We carefully select the right team to work closely with them to help achieve their goals now and for years to come. Kleinwort Hambros enjoys the benefits of being part of Societe Generale with valuable access to the resources and services of one of the world’s leading financial groups.


To read more information, click here.

Kleinwort Hambros has a wealth of experience in helping individuals, families, entrepreneurs, charities and their advisers to manage their financial assets, whether they are based in the UK or overseas.

Kleinwort Hambros