Global Investment Outlook: Q4 2021
Multi-Asset Outlooks from Leading Asset Managers
As markets continue to cope with the confluence of the coronavirus Delta variant, higher inflation, and the onset of Federal Reserve tapering, many investors are turning an eye towards emerging economies, evaluating the spread between EM and DM rates, and wondering if 2013-like policy announcements in the Western world will cause similar ripple effects to cascade into emerging markets.
From global multi-asset outlooks to deep-dives on specific asset classes such as EM debt and commodities, we have gathered some of the best quarterly investment outlooks from leading asset managers.
Where the economy goes from here depends on various factors including how the coronavirus develops, whether inflation turns out to be transitory, and what happens with monetary policy. Supply chain disruption has added a further layer of concern.
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The policy response to the Covid-19 fueled economic downturn helped lead a recovery that has been faster and stronger than many predicted. There has also been a movement away from service consumption towards a greater demand for goods.
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The powerful economic restart is broadening, with Europe and other major economies catching up with the U.S. BlackRock expects a higher inflation regime in the medium term – with a more muted monetary response than in the past. Tactical implication: BlackRock is overweight in European equities and inflation-linked bonds, with an upgrade in emerging market?local debt to overweight.
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Fixed income investors are operating in a market environment buffeted by various factors – Covid-19 uncertainty persists, Fed tapering is slated before the end of the year, and rate hikes could be coming next year.
The global growth picture is mixed, with emerging markets trailing the recovery that has been seen in developed markets. Emerging market fixed income generally posted negative performance in Q3 2021.
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Emerging markets (EM) have struggled so far this year – lingering Covid-19 concerns, Chinese volatility and the anticipation of Fed tapering all providing a headwind. Despite this, Amundi suggests that the way forward is positive for EM.
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Russell 1000 and large-cap Growth fared well in Q3, eating into Value’s significant YTD lead. Uncertainty over the U.S. economy’s trajectory, including the path of inflation and Fed tapering, is weighing on equity valuations generally.
PGIM Fixed Income looks at where the bond market may be headed, accepting that this year’s strong recovery may not persist given numerous and continued economic challenges. They look to identify where the opportunities may be going forward.
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Franklin Templeton puts forward hedge fund type investments as a source of investment return in what is a challenging environment. Traditional markets meanwhile are volatile thanks to the ever-changing economic backdrop.
Putnam Investments provides their Q4 outlook on fixed income markets, with updates on global monetary policy, tapering QE in the United States, and other economic implications for fixed income investors.
Emerging markets are in focus in this quarterly report from City of London Investment Group. The report covers 15 different emerging market economies in depth, complete with recent economic data.
Gold and the U.S. dollar are explored as part of a Reuters technical analysis on the major commodity markets.
This issue of the ICMA quarterly report covers the move away from LIBOR, sustainable finance developments, digital representation of transactions, the commercial paper market in Europe and CSDR mandatory buy-ins.
ABOUT THE AUTHOR
Andrew Perrins is a former Actuary and Asset Allocator. After qualifying as an Actuary, he worked for 15 years in investment management, serving as Director of Asset Allocation for Abbey Life and for Chase Manhattan, before setting out on a more entrepreneurial path.
To contact him,?email?[email protected]