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.
Despite the current wave, it may seem as though the COVID-19 pandemic is waning, but its impact is certainly still being felt. Economies remain under threat from rising inflation and rising interest rates. Meanwhile the ongoing war in Ukraine is only exacerbating these woes, perhaps more so in certain countries than others. Investors are increasingly concerned about recession, and after creeping to an all-time high, the oil price took a slight hit in June as a result. Commodities & natural resources funds have fallen after months of outperformance. Bond yields spiked in the middle of June, but have weakened since. Consumers must face the fact that the cost-of-living crisis has only just begun.
Lindsell Train’s chair highlights the material risks to the value of equities.
Karl Sternberg, chair of Monks notes that the scale of monetary largesse during the critical early stages of the pandemic turns out, with the benefit of hindsight, to have been too much.
AVI Global’s Susan Noble says the major issue looking forward is energy and food price inflation adding to supply chain issues resulting from the pandemic.
The manager of Bankers thinks that while there is a real risk that economic activity contracts in Europe and elsewhere, purely through demand falling as consumers pay more for basic goods and services, shares are already pricing in a slowing growth outlook.
The managers of Edinburgh Worldwide say there have been two prominent themes active in financial markets over the past decade and beyond: technology empowered globalisation and benign inflation and the expansionary monetary policy of many central banks.
The investment team at Scottish Investment Trust reiterate that it’s more important than ever to focus on investing for the long-term.
The managers of Baillie Gifford UK Growth explain their thoughts as to why a material stock market rotation has taken place in which ‘growth’ businesses have fallen out of favour and their share prices have consequently performed poorly.
David Horner of Chelverton UK Dividend says the market is currently coming to terms with a phenomenon not experienced for quite some time, namely inflation.
Montanaro UK Smaller Companies’ manager says during rising inflation and supply chain challenges, high quality well-managed small companies with strong market positions and pricing power have been able to pass on additional costs.
Jane Tufnell, chair of Odyssean says never before has it been so important for companies to be able to improve themselves to create value.
Rockwood Strategic’s managers highlight that within equity markets high valuation stocks, particularly in the technology and early-stage healthcare sectors, have been very weak.
The managers of BlackRock Income and Growth believe it is still likely that government stimulus continues to be retracted, and monetary policy is tightened in the face of more persistent inflationary pressures.
James Henderson and Laura Foll of Henderson Opportunities discuss the best performing sectors which were either positively exposed to rising commodity prices or defensive sectors such as utilities and pharmaceuticals.
The chair of Schroder UK Mid Cap says real value exists around current levels for trade buyers prepared to take a longer-term perspective and look through the current uncertainties.
The managers of Momentum Multi-Asset Value think the landscape has normalised to some degree from the extremes of 2020 though we find ourselves with a complex background of rising inflation and central banks beginning to unwind historically record levels of stimulus.
Sebastian Lyon, manager of Personal Assets, says we are shifting from a ‘just in time’ to a ‘just in case’ economy. Higher domestic capital expenditure will follow in order to add resilience to developed economies.
The managers of Aberdeen Diversified Income and Growth note that Omicron continues to weigh on supply chains, exacerbated further by China’s zero Covid strategy. At the same time the war in Ukraine compounds these issues and the team expects continued disruption as a result.
Renewable energy infrastructure
The chair of Aquila Energy Efficiency says it is widely recognised that there is a financing gap with energy efficiency investments in both the public and private sectors, often because of scale and complexity, thus capital should be directed to focus where it is not currently invested.
JLEN Environmental Assets’ Richard Morse thinks this is an exciting time for an environmental infrastructure fund as it looks to the future with a rapid increase in renewable energy generation, low carbon transport and the charging/fuelling network needed to support this.
Kevin Lyon, chair of NextEnergy Solar notes that the UK power market continues to experience sustained high prices.
The chair of SDCL Energy Efficiency Income explains why within the energy sector, efficiency may not be the whole answer, but it is probably at least half of it.
John Roberts of Triple Point Energy Efficiency Infrastructure says the devastating events in Ukraine have highlighted the importance of a low carbon, efficient energy system to energy security.
Atrato Onsite Energy’s investment adviser believes the focus on decarbonisation, both domestically and corporately, is reflected in the growth in demand for Renewable Energy Guarantees of Origin certificates and a commensurate increase in price.
Sue Inglis of ThomasLloyd Energy Impact says emerging market countries in Asia are returning to growth and there has been a resurgence in electricity demand as lock-downs end and restrictions eased.
We have also included comments on global emerging markets from Templeton Emerging Markets and Utilico Emerging Markets; North America from BlackRock Sustainable American Income; Europe from JPMorgan European Discovery, JPMorgan European Growth and Income and Montanaro European Smaller Companies; Japan from JPMorgan Japan Small Cap Growth & Income and CC Japan Income & Growth; India from JPMorgan Indian; private equity from abrdn Private Equity Opportunities; growth capital from Chrysalis; infrastructure from GCP Infrastructure; biotechnology & healthcare from Biotech Growth; farming & forestry from Foresight Sustainable Forestry; commodities & natural resources from Geiger Counter and property from Schroder European Real Estate, AEW UK REIT, LXi REIT, Schroder Real Estate, Urban Logistics REIT, Custodian REIT, NewRiver REIT, Workspace and Industrials REIT.
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