We forecast stronger equities and a weaker dollar

We continue to think that risky assets will gain more ground and that the US dollar will weaken against a backdrop of a recovering global economy and continued accommodative monetary policy. In our view, the outcome of the recent US elections and the news that a vaccine for COVID-19 may become available earlier and be more effective than previously anticipated has improved the distribution of potential outcomes for the economy and risky assets. We have revised up our forecasts for equity markets and for most major currencies vis-a-vis the greenback. We still think that government bond yields will remain at very low levels. The two key risks to this forecast are i) that the pandemic takes another turn for the worse over the winter and a vaccine still takes a long time to develop, produce, and distribute; and ii) that policymakers withdraw support prematurely, undermining the economic recovery and the prospects for risky assets.