Clear thinking investment management

In an earlier note this year we argued that full employment appears to be taking precedence over price stability: a higher tolerance for inflation might be justified by our society today – in the name of reducing unemployment. Underneath this policy shift and catalysed by the current crisis is a growing awareness of inequality – and the appetite to reduce it

The relative performance of US equities and the outlook for the Technology sector are closely aligned. This short note aims to highlight headline risks that the Technology sector may face in 2021.

Major crises often legitimise and cement radical policy changes. The 2008 Financial Crisis allowed quantitative easing to become accepted and in time to become mainstream. The current crisis has legitimised government deficit spending – financed by central banks. This policy shift may be a reflection of a change in societies’ priorities. The implications for nominal GDP, equities and bonds could be profound.

It sounds odd to talk of the risk of good news, especially with some markets at or near all-time highs. Yet if we look under the surface of equities and bonds, enormous pessimism about the economy is embedded in valuations.

It can be argued that Europe’s jointly issued stimulus package is the most significant moment for the EU since the launch of the single currency.

Given the economic shut down, bank investors are correctly weighing the scale of loan loss provisions in 2020. This is the dominant driver for bank earnings this year, but this focus obscures from view other positive earnings catalysts and developments that can act to support European bank share prices as we move toward 2021. In this note we discuss some of these supportive factors for banks that are tangible this year and next.

The bear case for the global economy is well understood and well-articulated. In this article we outline arguments that make the case for recovery. The argument is built on a series of observations.

Many investors believed the dot com bubble was a one-off, with never to be repeated dispersion in valuation within the equity market.

A year of weak economic data and the ECB easing monetary policy has weakened the Euro. What if the trend in the currency changes? What are the implications for European Equities?