Executive summary
- The reflation trade of 2020 has proved strong and largely consistent with macro developments. In our view, the world is evolving towards a ‘different normal’ investment environment. Inflation and interest rates will be low for a prolonged period.
- Fullerton’s regime framework is signalling a ‘sweet-spot’ for investors – we are bullish on risk assets, and especially Asian equities. We favour the sectors that are best positioned to navigate structural trends.
- Investors still need to actively manage with caution. Key risks remain COVID-19 centric and geopolitical i.e. changes in China’s industrial policies and further deterioration in US-China relations. Medium-term risks include valuations becoming too stretched, eventually leading to a risk-asset price bubble.
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