The global economic slowdown should continue to gain strength over the next year due to four obstacles: the fifth wave of COVID-19, the rise in food and energy prices, the slowdown in the Chinese real estate sector, and the tightening of monetary policy in emerging and English-speaking countries.
The US economy is less vulnerable to these factors, and therefore becomes theirs inflationary demarcation from the rest of the world.
Even if the Fed cannot afford to be patient, the incipient normalization of monetary policy brings new risks to the financial markets in light of the demanding valuations of domestic assets.
The European economy is seeing its energy import bill spike and its reliance on global manufacturing supply chains, which continue to be hit by the pandemic. However, unlike the US, it will benefit from the positive budget increase associated with the NGEU plan.
Given the ongoing ad -tation of your real estate sector, China must continue to export heavily to maintain decent GDP growth. As a result, Beijing will further slow the yuan -preciation by amassing foreign currency assets. Much of these assets will be recycled into the US Treasury bond market, This hinders the Fed’s efforts to normalize monetary policy. China will come under pressure from the USA to implement a more far-reaching economic policy in the course of 2022.
Allocation and investment strategy
In the area of stocks, We focus on long-term growth companies with good visibilitythat is, they are not overly cyclical and are able to carry cost-induced inflation without restricting their activity.
Refer to Fixed rentWe selectively look for bonds from companies with attractive yields whose business models are not severely affected. This is a necessary feature in a context of ample liquidity and few pricing mechanisms.
For his part, Emerging markets offer valuable niches (both on bond and equity markets) suffered from orthodox politics in China, as well as inflation and the prospect of normalization in US monetary policy.
We have moved from “infinite quantitative easing” and “prolonged interest rate cuts” a year ago to a r -id and widespread rate hike on a global scale. The different economic situation in the various economic blocs requires heterogeneous -proaches.
Investors could take a high credit risk in return for a real return of close to 0%. This abundant liquidity, coupled with an environment of severe financial repression, means that the pricing mechanism no longer functions as it did in the past. The resulting inefficiencies are positive for active management professionals.
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