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First a flash recession, then a flash rebound – what’s next? The global economy is undergoing a mid-cycle slowdown and inflation is back on the radar. But markets still offer ample opportunities for solid longer-term growth. We explore these opportunities and some of the biggest trends to watch for in our Market Outlook Year-End 2021.
These are the major investment trends to consider in the last quarter of 2021:
The big picture: Mid-cycle opportunities
After a flash recovery, a consolidation of growth is in store that will leave scope for mid-cycle opportunities. Economic growth in the eurozone will be stronger than in the US over the coming months, as accommodative policies and productivity gains lead to strong post-pandemic growth rates. In equities, we recommend investors go for growth and add a defensive touch – we have upgraded Swiss stocks and reiterate other sectors like healthcare, IT, financials, as well as dividend stocks for income.
Spotlight on: Asia
Despite regulatory uncertainties, we see plenty of opportunities in domestic China themes. However, we are also broadening our focus to Asian quality companies outside of China and reiterate our call for India.
Fixed income: Be active, be selective
We believe that active duration management is the key to mastering the sharp moves in bond yields driven by high levels of uncertainty and rapid changes in investor positioning. In a mid-cycle slowdown, the tide will no longer lift all boats, although we expect upgrades to still outpace downgrades. We recommend sticking to moderate credit risk overall but becoming pickier on a single title level. Another factor to bear in mind is that emerging market debt yields are comparably very attractive – we favour higher quality names.
Next Generation: In focus now
A forward-looking investment approach is paramount if you are attempting to distinguish between the winners and losers of longer-term structural trends. However, when pursuing this kind of approach, identifying current tactically attractive themes is also key. We are focussing on three attractively valued themes that we think have the wind at their backs: the circular economy, healthy living, and future mobility. Some of the companies that embody these themes can be found in our Next Generation universe.
Resilient companies: The secret to success
Companies the world over are seeing the winds of change sweep through their markets. We take a closer look at those companies whose robust approach enables them to survive and even thrive in the harshest environments. These resilient companies, which can be found across industries, demonstrate high pricing power; a growth pattern that is largely independent of the economic cycle; and have disruption-free supply chain strategies.
Listen to the podcast
Click on the player below to hear Bhaskar and Mark’s conversation: