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
All eyes remain on vaccination levels across the world and the hope that as they reach more people, countries operating below their capacity can finally catch up and recover. Soaring energy prices continue to rock sentiment closer to home but have of course been good news for commodity and natural resources funds which, after months of underperformance, topped returns in October. Meanwhile in the Far East, investors are still concerned about China’s changing regulatory environment, which has had a knock-on effect on the MSCI Asia Pacific and MSCI Emerging Markets indices.
Global
Ben Lofthouse, manager of Henderson International Income, highlights a number of themes that have materialised since COVID, and which could be drivers of ongoing change and investment.
UK
Mercantile managers, Guy Anderson and Anthony Lynch, highlight challenges on the supply-side and a surge in inflation – headwinds which will need to be monitored, as they feel that prolonged disruption could threaten demand and ultimately damage the recovery.
Georgina Brittain and Katen Patel of JPMorgan UK Smaller Companies remain positive on the thesis of a strong UK recovery, heightened by the on-going strength in trading as shown during results season.
Jane Lewis, chair of Invesco Perpetual UK Smaller Companies, says that while uncertainties appear to be lifting and there is greater visibility in how companies are navigating the recovery, changes in operating and economic environments may affect them in ways not yet fully understood.
Asia Pacific
John Russell, chair of Henderson Far East Income, says the post-industrial world in the Far East will be driven by innovation, technology and entrepreneurship, with success depending on entrepreneurial drive, an open-minded population and a strong domestic consumer base.
The managers of Asia Dragon are cautiously optimistic about Asia markets as they think corporate earnings will rebound sharply this year and because government and central bank policies are likely to remain supportive.
Innovation, technology and entrepreneurship will be key in the Far East
The managers of Pacific Assets are less positive, unnerved by the headwinds China currently faces such as a greater government scrutiny and political tensions.
Fidelity Asian Values’ manager, Nitin Bajaj, believes that small cap valuations are playing catch up with those of larger stocks and that there is more to go for.
Europe
TR European’s chair, Christopher Casey, believes a global backdrop of increasing GDP and a pick-up in corporate earnings will be supportive for European smaller companies, but cautions that, as growth inevitably slows post the COVID-19 recovery, it would be reasonable to expect more modest returns in the medium term.
A pick-up in corporate earnings will be supportive for European smaller companies
James Ross highlights the success of cyclical sectors and companies in the face of the pandemic but anticipates a more balanced environment with the recovery ‘adequately priced in’.
Other
We have also included comments on North America from Brown Advisory US Smaller Companies; global emerging markets from Fidelity Emerging Markets; Japan from Baillie Gifford Japan and Schroder Japan Growth; China from Baillie Gifford China Growth; country specialist from VinaCapital Vietnam Opportunity and Vietnam Holding; flexible investment from Schroder BSC Social Impact and JPMorgan Multi-Asset Growth & Income; growth capital from Schroder British Opportunities; commodities & natural resources from CQS Natural Resources Growth and Income; private equity from HarbourVest Global Private Equity and ICG Enterprise; hedge funds from Gabelli Merger Plus+; renewable energy infrastructure from Bluefield Solar Income and property from BMO Real Estate Investments, Target Healthcare REIT, GCP Student Living and PRS REIT.
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