Please find Weekly Digest.
Rather than the normal accompanying update, I wish to share three more fundamental points this week, to try to get away from the day-to-day “noise” of newsflow.
- Looking past Covid. We had what has, thus far, a helpful template for our central case scenario for global economic output over the past year that I have previously shared and this helped shape our portfolio construction. As we move on, I hope this new framework helps set out different scenarios, built around our central case
- We wish to protect our clients against inflation. Fiscal and monetary support for financial markets is huge. The topic of the below graph (source John Authers, Bloomberg) does not get the most media attention as is quite dry, however, it shows US M2, a broad measure of money supply over twenty years. It highlights the level of support provided by central banks now compared to the financial crisis. Many financial commentators argue that the central bank response to the financial crisis was too slow. They have certainly not made the same mistake this time:
What does this mean? Inflation (in particular financial repression whereby inflation > interest rates) is likely and we wish to protect you/your clients against this risk via assets such as equities, commercial property and commodities.
- Our equity investment philosophy. We believe superior long-term returns are generated by equities that are:
This is not the first time I have highlighted this, however, whether you have known us for a short or long period of time, I hope it is helpful to share/re-cap this core principle that has served us well over the long run