Careful Playing Market 'Hopscotch'
Market Insights | Investment Solutions

Paul Ashworth, Managing Partner

Careful not to play market 'hopscotch' looking through the rear vision mirror.
Posted 16 November 2020

We are operating in the surreal position of being in both the best and worst of times. Investors need to keep their heads. Risk will be uniquely rewarding, but there are trends and reversals we have identified that will benefit from a measured approach through 2021 rather than the some of the frenetic backward looking ‘hopscotch’ we have been observing in recent times.

As investors have a habit to do, they have forgotten the events of March through to May of this year, and in some cases, we think, are dangerously extrapolating the recent run-ups in technology gains into a re-run for 2021. This whilst also trying to navigate and play short-run rotational ‘hopscotch’ with recent rapidly changing news.

This has all become more evident over the last few weeks. Using the ‘hopscotch’ analogy, 'flighty' investors are being forced to play again having only just made their move. From the anticipated ‘Democratic blue wave’ and its heralding of major fiscal stimulus, then giving way to a Congressional status quo and likely more muted stimulus, to only then be upended with new reflation hopes on Pfizer’s COVID vaccine phase 3 results, to then again being upended with the brutal reality of COVID numbers coming out of the US, UK, Europe and Eastern Europe. Add to this the cancellation of the Ant float by the Chinese Communist Government, which highlights Chinese internal reversion to its ‘Emperor’ model of government. What this all highlights is: Investors need to carefully evaluate the firm ground, not just the ‘shifting sands’ as they enter 2021.

Macro Environment

  • Doesn’t (yet) support the ‘Great’ reflation trade but does put the spotlight on the extent of technology advancement compared to cyclicals and improved, upside macro risk conditions.

  • We still hold the view that we need visibility and commitment on sustained multi-year fiscal stimulus. As with the post GFC period, we see significant risk of divergence between regions with Europe again likely to be too fiscally austere and pay the penalty for the next 10-20 years.

  • The COVID vaccine announcement by Pfizer is likely to be followed by other similar positive news on vaccine candidates. This is potentially a double-edged sword. It may well cause policymakers to moderate fiscal stimulus before economic growth rates have solidly returned to pre-COVID growth rates.

  • In the US, growth in 2021 may well hit 4.5% and maybe 6%, depending on vaccine rollout timing. The risk is on the upside, with constrained fiscal stimulus a downside risk.

  • Equity markets operate with the once-in-a-lifetime cover suppressed interest rates and multiple windows and programs for liquidity.


  • Based on our macro view, most notably for the US, we remain concerned with the relative valuations for the FAAANGM cohort compared to the S&P 494 cohort. The FAAANGM cohort is trading on a forecast PE premium of 100% compared to the S&P494 cohort.

  • It's crazy to buy this technology growth at these stratospheric valuations, but it is a great time to buy fantastic ‘smart’ industrial business. In our Global Equity strategy, we are seeing 15%+ consensus earnings growth and a forward PE of 20 times. We find these prospects very satisfactory.


  • The seeming cancellation of Ant’s IPO by the Chinese Government at Chairman Xi’s command, to us, highlights the significant stalling in China’s development. These sovereign risks are ever-increasing.

  • The apparent investor ‘gold’ of accessing 1 billion consumers may well be somewhat illusory. Demographics are key - the population is rapidly ageing and becoming more focussed on savings rather than consumption.

  • The political implications of the Chinese Communist Party are immense. Capitalism is the single best thing that has happened to China in the last 2000 years. For China, one fears its experience of it will be short-lived. Political risk is we think under-appreciated and a significant fuel for volatility in 2021.

Financial Repression

  • What is supportive for risk markets is dismal for traditional savers with lower risk appetites.

  • With an improving macro risk outlook, sovereign fixed-rate debt is tough, and the last 30 years free-kick for bond markets is finished.

  • Markets are forward-looking and given the year we have just had, we don’t see the risk of the Federal Reserve tightening monetary conditions till at least late 2022 - if not 2023.

  • This provides an unambiguous and uniquely policy signalled, positive backdrop for market risk, for the next 9 to 12 months.

Cameron Harrison have been advising business owners and their families on asset allocation and intergenerational wealth management for over 50 years. We have demonstrated over a long period our ability to manage investments through both the good times and bad by keeping the client at the centre of our business.

For more information on our approach to investment strategy or any other inquiries, please contact us on +613 9655 5000.

Speak to one of our advisers to learn more:

Sourced from:

Photo by Andy Beales