Perhaps one of the clearest indicators that the world is returning to normal is that financial markets are worrying about lots of different things.
To be fair, the summer of 2021 has given plenty of things to be worried about, whether that was the military withdrawal from Afghanistan, the Chinese government’s waves of market regulation, or the supply chain problems closer to home in the UK. Of course, the delta variant of COVID has also featured – but in general, we’re starting to see more dispersed and differentiated views of the next decade start to form.
We believe that’s a good thing. The exit from crisis mode should bring about more opportunities to distinguish good investments from bad ones, and reward those who look to invest in the winners of the next cycle, rather than the one that’s just finishing.
Some investors are still not convinced that the COVID-19 crisis will mark an end to the low growth and low inflation era which persisted after 2008. We think differently. Consumers, governments and companies are all changing their behaviour – looking to spend and invest, rather than hunker down. Acknowledging that positive shift in sentiment will be vital over the next cycle.
We think the likely winners are those assets which perform well in periods of rising economic growth and positive inflation. Our portfolios are tilted towards companies which are sensitive to growing consumer confidence (industrial and smaller businesses) or are positioned in the right sectors for government and corporate spending (healthcare and climate change).
At the same time, we continue to allocate away from low-yielding investment grade bonds – looking to find more interesting areas of the fixed income market (mortgage backed securities and emerging market debt), or to use alternative strategies which are uncorrelated to broader markets.
Please note, our Market Overview & Outlook is our view of markets and does not constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. Overseas investments are affected by currency movements and exchange rates. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch, telephone 01392 875500, info@SeabrookClark.co.uk