Introduction……..
Since we released our Half-Year Investment Review & Outlook back in July, we have seen most of the main global equity indices continue to grind higher, with some relatively small bouts of volatility along the way while keeping the general trend of the last 18 months well intact.
With the main indices either side of the Atlantic having now rallied between 15% – 20% so far this year, we acknowledge that it would be normal to see some pullbacks as we head towards year-end and into 2022.
However, while slightly smaller gains may be expected after equities’ robust run of the last year and a half, we would argue that risk assets can and should still move higher in the medium-long term. We are of the belief that stocks will continue to be driven by a combination of robust earnings growth, attractive valuations relative to bonds, an ongoing return to more normalized economic activity as a higher percentage of the global population receive their vaccines, and still-accommodative central banks who will not tighten policy carelessly and stifle economic growth in the process of doing so.
Over the course of the last month or so, we have seen a range of themes with regard to financial markets, including:
- Europe’s reopening and simultaneous economic recovery, with questions arising over a potentially peaking US and China.
- Ongoing concerns surrounding the now infamous Delta coronavirus variant, vaccine efficacy with regard to Delta, and renewed lockdowns in countries with low vaccination rates.
- Inflation remaining high in many developed nations, albeit broadly expected to decline in 2022.
- Timing on a tapering of the Federal Reserve’s massive bond-buying programme and what this will mean for risk assets.
In addition to these core investment themes, we have seen some interesting developments worth mentioning, from concerns about a possible peak in earnings growth in the United States, to US President Joe Biden’s decision to fully pull American troops out of Afghanistan, to China tightening its technology regulations and sparking the worst sell-off in Chinese stocks since 2018 as a direct result……………
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