Executive Summary

• Liquidity remains ample and supportive. Pent-up demand from excess savings and supply-side constraints across most value chains suggest the global economy will be strong for some time. Inflation expectations are likely to keep rising putting upward pressure on the yield curve. At this stage, the main risks to growth are related to Covid strains impacting vaccine campaigns and tighter liquidity conditions; two scenarios we currently don’t foresee.
• Developed credit markets are at historically high valuations. The benefit from a continued recovery in economic growth does not compensate for the headwind of rising long-term interest rates. Emerging market credit is the only area left providing real value.
• The USD structural bear market is still in play despite a short-term appreciation of the green-back due to a more effective vaccination campaign in the US. We still recommend selling USD rallies.
• While valuations remain elevated, equities can benefit from an environment of increased economic growth and rising inflation expectations as earnings expectations keep being revised upward. We favour pro-cyclical sectors based on their relative cheapness. Geographically, we continue to favour non-US equities.
• Commodities remain one of our most preferred asset class based on valuation, the positive impact from a weaker USD and a global economic recovery. We favour energy commodities and precious metals as beneficiaries of negative real interest rates.

Documents annexes

MAM-Investment-Outlook-2021.Q2.pdf