Living with Delta
AROUND THE TABLE | OCTOBER 2021
At Crestone’s most recent investment forum, we asked panellists to share their views on the likely path of markets and the global economy in 2022. In particular, we asked to what extent risks from the recent Delta outbreak, stickier inflation, and signs that central banks are starting to withdraw stimulus could derail the recovery.
Our panellists included Gopi Karunakaran, Co-Chief Investment Officer at Ardea Investment Management, David Bassanese, Chief Economist at BetaShares, Kate Howitt, Portfolio Manager at Fidelity International, Sonali Pier, Director at PIMCO, and Projit Chatterjee, Managing Director, Senior Equity Strategist at UBS. The session was moderated by Crestone Wealth Management’s Scott Haslem, Chief Investment Officer, and Stan Shamu, Senior Portfolio Strategist.
- The will to return to lockdowns is low - A sustained economic recovery is the most favoured outlook, and COVID-19 is seen increasingly as a pandemic of the unvaccinated. With plenty of spare capacity and pent-up consumer buying power, policy is likely to remain accommodative with growth to advance at an above-trend rate, particularly in the developed
- Attractive valuations should see capital return to emerging markets - More activist China policy and low vaccination rates have seen emerging market equities Non-China economies are in much better shape than in 2013, which is when the last US tapering occurred. However, investors may increasingly see emerging markets as a selective opportunity set, with a view toward non-China markets.
- There are still some challenges ahead for domestic equities - Investors are increasingly able to look across the chasm to a likely solid economic recovery in However, after a strong earnings reporting season, cost and wage pressures are starting to emerge and company outlook statements are weak. However, rates are not seen rising before strong growth is once again observed.
- Tapering is a headwind to fixed income, but tail risks are mis-priced - Risk premia has congregated at the low end of historical averages in fixed income markets, suggesting an over-confidence in the consensus view. This is largely due to the strength of the improving economic And for this reason, bond yields are expected to keep rising, but not much above 2% in the US or Australia.