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Wealth Management: Market Perspective – Moving on?: Foreword (en anglais uniquement)

Kevin Gardiner, Global Investment Strategist, Wealth Management

Western economies have been growing again since May. The most dramatic slump in recent memory was compressed into six weeks or so from mid-March. Unfortunately, some of the most portentous predictions weren’t.

Having tried the forecasting game ourselves, we are aware (we hope) that statements about the future should be low key, qualitative – and contextualised. In investment markets, the direction of change is often more important than its decimal (or even percentage) points, and expectations and the policy climate matter hugely.

There is still a long way to go. China’s GDP, and retail sales in the US, UK and Germany, may have regained pre-crisis levels, but most of the world’s economy hasn’t. Contagion rates remain uncomfortably high in the US and much of the emerging world. Some key support measures – unemployment pay in the US and furlough schemes in Europe – may be scaled down soon.

Nonetheless, our view remains that yet another superlative may be added to the long list describing this economic downturn: it may prove the shortest. In portfolio terms, this suggests that the most likely assets to deliver long-term inflation-beating returns are still those linked to economic growth. For us, this doesn’t include gold and silver, recent gains notwithstanding.

But with that recovery, however incomplete, in mind, we’re also wondering whether it’s time in some respects to move on, investment-wise. Are the stars aligned for some reversal in the long-standing outperformance of US stocks and the dollar? And while we have not been surprised to see stock markets anticipating the rebound, have some sectors and regions now looked too far across the valley – are “growth” stocks, and China’s market indices, bubbles waiting to burst?

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