Executive summary
- The GDP growth recovery is at record strength, and may be around its
peak. Markets have ‘priced-in’ a lot of good news. Inflation has also surged
significantly above trend. - We believe 2H21 is likely to see robust risk asset returns that are
above average, but are slowing down as growth continues to ease and
as liquidity tightens. At the same time, over this transition period where
inflation has jumped rapidly and monetary conditions will eventually tighten,
there could be bouts of significant volatility. - We remain positive on global equities and continue to favour sectors like
consumer products, IT, communications, healthcare, and renewables.
We are negative on US bonds, but note that a significant sell-off has
already unfolded. There may not be a lot more upside in nominal yields to
unfold until the Fed starts to increase its policy rate. - We are now cautious on Asian corporate credit as there is likely to be
less spread compression ahead, tighter liquidity, and more credit risks.
We have revised our USD outlook to modestly positive, as the US
current account deficit is expected to improve significantly, and as the US
terms of trade is rebounding.
You can also hear from our Strategist Robert St Clair, as he shares key insights on the outlook for inflation, implications for investors, and the impact of mega trends on investment returns.