SUMMARY
There will be many surprises that will challenge the confidence of investors from the pandemic. We do not want investors to react to or chase short-term COVID distortions in markets.
Investment strategy
July 18, 2021
How to manage through a longer end to the pandemic
July 18, 2021
- The infectious “Delta variant” is changing the dynamics of the pandemic and the contours of the global recovery. In our view, to “Reconnect the World” and achieve a full, global economic recovery, the spread of COVID will have to be better controlled. This is unlikely before year end.
- We agree with Fed Chairman Powell that the recent, unusual inflation surge will abate and that core inflation will be at a slower pace a year from now once COVID distortions fade. What’s highly notable is how strongly financial markets have accepted this view.
- The premium level of US yields over other developed markets and the latest COVID developments now argue for at least a modest reversal higher in the US dollar.
- A setback in the fight against COVID could see the US and China markets outperform again, with “growth” shares feeling the added relief from COVID-blunted interest rate pressures.
- The time is ripe to upgrade the quality of assets in our portfolios and to seek sustainable drivers of returns in the face of what are likely to be more volatile markets. In this scenario, a shift to China may also be profitable.
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