3Q21 CIO Insights
Dear valued clients,
We started the year with “A New Hope”. With the increasing rollout of vaccines, we are now beginning to see encouraging signs of normalcy.
By no means are we saying the world has turned the corner in its fight with the pandemic. But recent developments in the US and parts of Europe are pointing towards a strong recovery. US GDP is expected to grow by over +6% this year, from -3.5% last year.
With this V-shaped recovery, inflation fears as reflected in surging commodity prices have resurfaced. Will the Federal Reserve take its foot off the pedal and taper its stimulus policies? If so, would the bullish sentiment reverse its course?
The Bank of Canada, followed by the Bank of England were among the first central banks to taper bond purchases, and others are expected to follow. However, we believe they will be reassuring in communicating that interest rates will stay zero-bound for a considerable period of time.
The “taper tantrum” lesson of May 2013, in which bond yields spiked, will lead to the Fed taking a slow path in withdrawing its monetary stimulus - particularly as they view current elevated inflation figures to be transitory. Alongside the high levels of uninvested liquidity, we stay constructive on the outlook for risk assets. We continue to advocate that you stay invested in equities, bonds, and gold through our Barbell portfolio approach.
In this publication titled “Hope into Reality”, we dive into the transformational shift towards Electric Vehicles (EV) as well as the income themes of China banks and Singapore REITs.
I hope you enjoy the read.
Hou Wey Fook, CFA
Chief Investment Officer
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