Insights for professional partners

Our lead article looks at the buzzword of the moment — stagflation. As investors’ fears of the potential stagnation of output coupled with rising inflation ebbed and flowed, equity and bond markets experienced some volatiliy. What will this uncertainty mean for the year ahead?

Our lead article explains that as China’s recovery slows, policymakers there look unlikely to stimulate growth by loosening either the monetary or fiscal purse strings.

In our first article, we explore how benchmark US government bond yields spiked as investors braced themselves for the release of pent-up consumer demand, encouraged by Joe Biden’s $1.9 trillion stimulus package. We take a look at where US bond yields and interest rates may go from here, and what that means for equity investors.

Markets have rallied strongly as investors look forward to better days ahead. It’s often difficult to work out what’s happening in the middle of a crisis, and we don’t know what will return to normal and what will have changed forever.

How low can yields go?

Trade wars continue to cloud the outlook for businesses and consumers. Closer to home, Brexit uncertainty has gone from bad to worse. Our new Prime Minister Boris Johnson’s first few weeks in office have been pretty spectacular.

We’re spending more time than ever before shopping through our smartphones and laptops rather than braving multi-storey car parks and crowded high streets. 

When the pace of economic growth begins to slow and the outlook becomes more gloomy, it makes sense for investors to start shifting their equity investments away from cyclical sectors and towards defensive ones, even if you don’t think a recession is necessarily likely to ensue.

While the Brexit deadline draws closer, the route to a deal between the UK and the European Union (EU) shows no signs of materialising.