Continuing recovery from crisis encourages pro-cyclical portfolios
In our latest article, we discuss how improving economic conditions reflect human ingenuity and perseverance in the face of adversity. A large gap exists between the global economy today and where it would have been without the pandemic, but this will be closed through above-average growth in the next few years.
The pace of recovery is slowing after the initial rapid rebound from global shutdown. In time, April 2020 is likely to be recorded as the starting point of a new economic growth cycle. There will be stark differences in recovery profiles between countries, depending on their success in containing the virus.
Surging new cases in the United States and Europe are weighing on activity while relative success in several countries in Asia and moderating cases in Latin America supports activity in those areas.
The likely rise in inflation in time encourages shorter duration in our fixed income portfolios to help protect against eventually rising longer term yields.
In our equity portfolios we have commenced a shift to more cyclical stocks such as in industrials, consumer discretionary, energy and materials sectors which offer more compelling value, will benefit as investors finally appreciate the improving economic landscape and will better weather higher inflation through their pricing power.
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I hope you find the article interesting and helpful in furthering your investment goals.
Please let me know if you have any questions.
This article is provided for general information purposes only and should not be construed as personal financial advice.
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