Economic and Political Monthly Roundup
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A collation of recent insights on markets and economies taken from the comments made by chairs and investment managers of investment companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned.
Roundup
While inflation concerns are still very much at the top of everyone’s minds, investors can’t help but feel a bit more optimistic after the misery of this time last year. Demand is still bouncing back and vaccination programmes are still going strong. 29.4% of the world’s population has now received at least one dose of a COVID-19 vaccine, while 15% are fully vaccinated according to Our World in Data. In the UK, savers have been given a much-needed boost of confidence.
Global
Inflation still a concern but optimism is contagious
James Dow and Toby Ross, managers of Scottish American, mull the idea that rapidly recovering demand could lead to a sustained bout of inflation, which is already evident from looking at shortages of building materials.
F&C’s Paul Niven, however, notes that policymakers and some investors think current rises in inflation are likely to be transitory and that pricing pressures will dissipate in coming quarters.
Gregor Stewart, chairman of Alliance Trust, says the pandemic crisis is far from over and so focusing on stock picking over macro factors remains more important than ever.
Another growing concern for global economies is supply issues
Brunner’s Matthew Tillett points out that companies with highly cyclical earnings profiles have continued to make the strongest gains, thanks in part to a massive leap in earnings expectations from the depressed 2020 level.
Herald’s chair, Tom Black, says supply chain issues are our greatest short-term concern. Potential over-ordering for this reason may now be flattering short term demand too.
UK
Law Debenture’s managers, James Henderson and Laura Foll, believe the relationship between earnings upgrades and share price performance is strong and has been a more powerful factor in investors’ minds than the growing concerns around the pick-up in inflation.
Angus Gordon Lennox, chair of Aberforth Split Level Income, says there is genuine confidence that economic activity is rebounding, as investment and consumption increase across the world and that this optimism is reflected in rising share prices and an uptick in the frequency of M&A deals.
An uplift in sentiment has been good news for share prices and M&A
The managers of Aberforth Smaller Companies highlight abundant evidence of inflationary pressures such as rising consumer prices and commentary from various companies.
BlackRock Throgmorton’s chairman, Christopher Samuel, thinks that the pandemic will have far reaching consequences for many years to come and will change how companies operate and how people interact.
The manager of SVM UK Emerging notes a flow of new business models is disrupting established businesses through new services or innovative technology.
The success of the UK’s vaccination programme has given savers a boost of confidence
Douglas McDougall, chair of Independent Investment Trust, agrees the most immediate threat to markets is unexpectedly high inflation, but in the longer term the problem of global indebtedness resulting from the financial crisis and the pandemic poses a threat to the stability of the global financial system.
The managers of Artemis Alpha feel the rapid roll-out of vaccination programmes across many developed countries has improved sentiment, creating expectations for a strong recovery as excess savings start to be channelled back into the economy.
Miton UK Microcap’s chair, Andy Pomfret, says recent trends align with those of earlier decades, when the mainstream UK indices outperformed the US exchange for an extended period, and the share prices of UK microcaps outperformed substantially.
Flexible Investment
Nick Greenwood and Charlotte Cuthbertson, managers of Miton Global Opportunities, have enjoyed the sugar rush triggered by the recovering economy but say all eyes are now on whether inflationary trends are transitory and if central banks are minded to remove the punchbowl.
Despite a strong recovery, all eyes are on inflation
The manager of JPMorgan Global Core Real Assets says the way we work, live and consume energy is changing and this impacts the investment landscape and presents new and exciting opportunities in the real asset market.
Renewable energy infrastructure
Shonaid Jemmett-Page, chairman of Greencoat UK Wind, is encouraged by the Prime Minister’s ten-point plan for the 2050 net zero emissions target.
The renewable energy sector is going through paramount changes as economies aim towards net zero emissions
The managers of Gore Street Energy Storage highlight changes to renewable energy market regulations and what they will mean for the future of the sector.
Other
We have also included comments on Japan from Atlantis Japan Growth; Asia Pacific from Invesco Asia and Aberdeen New Dawn; biotech and healthcare from BB Healthcare; commodities & natural resources from BlackRock Energy & Resources Income and Geiger Counter; Technology & Media from Polar Capital Technology and Allianz Technology; financials from Polar Capital Global Financials; debt from Henderson Diversified Income and TwentyFour Income; leasing from Amedeo Air Four Plus; infrastructure from Sequoia Economic Infrastructure Income; infrastructure securities from Premier Miton Global Renewables; environmental from Jupiter Green; royalties from Hipgnosis Songs and property from SEGRO, Primary Health Properties, Custodian REIT, BMO Real Estate Investments, Unite Group, Capital & Counties and Schroder European Real Estate.
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