Nov 3, 2020
Markets continued to rebound through the third quarter, as economies recovered from their post lock-down lows amid continued commitment to widespread fiscal and monetary policy support.
The Road to 2030: Investing in undiscounted change
Philip Saunders discusses the structural themes that will dominate over the next decade. In our view, the increasingly short-term focus of the majority of market participants and dominance of cyclical considerations in their thoughts and actions often obscures the powerful gravitational pull of the deeper structural forces, creating great potential for analytical advantage.
Thematic viewpoint: Prospects for inflation over the next decade
A decade of quantitative easing designed to support economies has lifted asset prices, but it hasn’t stimulated the velocity of money that is needed to trigger meaningful inflation. However, given the substantial fiscal support for lower unemployment, the rise of inflation makeup strategies from central banks and a rolling back of globalisation, we believe there is now a higher probability of an inflationary scenario developing from here.
Russell Silberston reviews the policy announcements by the major central banks around the world during the quarter. The Fed’s updated policy framework was the highest profile event, with a commitment to low interest rates for the next three years part of a plan to run the economy `hot’ to stimulate a recovery.
Summary of high conviction asset class views
Equities: Asia appears robust, while the US benefits from a positive cyclical outlook. At the sector level, we have upgraded our view on consumer staples.
Fixed Income: Our overall score on US sovereigns has moved negative and US duration has been downgraded. We have also downgraded EM local currency bonds to neutral.
Currencies: We have moved to a negative view of the US dollar and euro against the yen. Within the majors, the Chinese yuan remains our favoured currency.
Commodities: A recovery in economic activity into 2021 should translate into stronger demand for commodities and resources in general. Gold prices should remain well-supported.
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