What an incredible year it has been since the advent of Covid-19 in capital markets. The global fiscal reaction to Covid-19 and lockdown of economies – which could be described as a reaction to a global ‘Covid’ war – has been astronomical and dwarfs the fiscal stimulus post WWII and the global financial crisis. Despite the fact that most of the stimulus was targeted at developed market citizens, it has had positive knock-on effects in commodity based economies.
Commodity prices jumped in reaction to low supply and high demand as global superpowers announce infrastructure plans and move toward a greener economy to minimise emissions – driving prices of commodities like platinum, palladium, rhodium and copper higher. Domestic PMI numbers in most developed markets indicate a healthy economic activity recovery leading to improved business confidence and higher than expected company earnings results. All these factors contributed to the improving absolute and relative performance of global and emerging market value sectors.
Some global equity markets – especially US large cap stocks – are stretched from a valuation perspective, but we see more investment opportunities in US and non-US value stocks\sectors and have rotated our funds and portfolios accordingly. Equity markets have rallied hard; one can expect a small correction in the short-term in commodity and equity prices, but this will provide late comers with an opportunity to load up their allocations as the massive fiscal stimulus programs in developed markets could contribute to a healthy V-shaped global economic recovery, despite well-telegraphed fears of higher inflation or the risk of 3rd and 4th waves of Covid-19 infections.
Director and Head of Portfolio Management
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