economic and political review


A collation of recent insights on markets and economies taken from the comments made by chairmen and investment managers of investment companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned.




Investors appear to be feeling more confident than they have been for some time, with the global recovery well underway, markets boosted by the return of company dividend payouts and a significant uptick in M&A activity. Inflation worries remain, but the key concern for many is supply chain issues, particularly in the UK, where the impact of Brexit is hitting several industries. Nonetheless, vaccine programmes are still on track in most developed countries and global consumer confidence is almost back up to pre-pandemic levels, according to the OECD. The US is still the best-performing market, while also growing at a faster pace than its peers.






Recovery in full swing

Andrew Ross, chair of Witan, says reporting season is providing a measure of earnings strength in cyclical sectors, helping to confirm the recovery hopes that have driven their performance.

Smithson’s manager, Simon Barnard, says that in a world with resurgent growth, investors are less willing to pay high valuations for companies that can grow consistently through good times and bad, which is why ‘value’ companies performed better in the first half of 2021.

Dr Sandy Nairn, manager of EP Global Opportunities, observes a changing perception in equity markets as investors begin to anticipate the peak of the economic growth rebound following the COVID-19 pandemic.


‘Supply issues remain a key concern for global managers’


Murray International’s interim chair, David Hardie, says that a global economic recovery is no doubt underway, but that rates of economic expansion are likely to prove extremely erratic on a quarterly basis and vary enormously between continents, countries and regional economies.

Tom Black, chair of Herald, says that supply chain issues are the biggest short-term concern, which will have a negative knock-on effect on some manufacturing companies.




Temple Bar’s managers, Ian Lance and Nick Purves, say that although value stocks have staged a strong recovery from the lows reached in the summer of last year, investors should not anchor off the share prices of that time as valuations had become extreme.

Neil Hermon, manager of Henderson Smaller Companies, discusses how politics briefly took centre stage at the turn of the year as the UK and EU finally agreed a trade deal, averting the much-feared “no-deal” Brexit scenario.

The chair of Diverse Income, Andrew Bell, highlights how UK equities have been widely shunned by investors, due to a combination of Brexit related reasons and the domination of the FTSE 100 index by companies in sectors with low growth prospects.


‘UK equities have been widely shunned by investors for some time now’


Angus Gordon Lennox, chair of Aberforth Split Level Income, says there is genuine confidence that economic activity is rebounding, as investment and consumption increase across the world, which is reflected in rising share prices and an uptick in the frequency of M&A deals.

The managers of Aberforth Smaller Companies note that on top of the rise in M&A, the UK stockmarket has seen its first meaningful bout of IPO activity for several years. Most of these companies have online business models that thrived during lockdown and so, at today’s valuations, are of greater appeal to growth investors.


North America


Timothy Parton and Jonathan Simon, co-managers of JPMorgan American discuss the economy recovery in the US and how current economic data seems to indicate that it is moving towards mid-cycle. While the economy is rebounding, there are concerns around unemployment levels, inflation and the actions of the Federal Reserve.


#Though the US economy appears to be rebounding, unemployment and inflation concerns remain’


However, Don San Jose, Jon Brachle and Dan Percella, managers of JPMorgan US Smaller Companies, say that despite inflation fears, a confluence of encouraging economic data, strong corporate earnings, a drop in infections and fresh spending programmes have helped drive markets higher.


Global emerging markets


Fundsmith Emerging Equities manager, Michael O’Brien, shares his views on the ongoing tensions between US and China and how China is also exerting its power over Hong Kong.


‘The outlook for global emerging markets is looking more positive’


Maria Luisa Cicognani, chair of Mobius, says the outlook for emerging markets is positive with economic recovery already taking place in several regions. A growing middle class, strong local brands and innovative business models have helped the cause for emerging market countries.




We have also included comments on Asia Pacific from Aberdeen Asian Income; Europe from European Assets and Fidelity EuropeanJapan from Fidelity Japan; flexible investment from RIT Capital Partners; commodities and natural resources from BlackRock World Mining; private equity from Apax Global Alpha, Literacy Capital, Pantheon International and BMO Private Equity; hedge funds from Pershing Square and BH Macro; debt from Axiom European Financial Debt, Invesco Bond Income Plus and Riverstone Credit Opportunities Income; renewable energy infrastructure from The Renewables Infrastructure Group; environmental from Impax Environmental and property from Derwent London, CLS Holdings, Tritax Big Box REIT, UK Commercial Property REIT and Yew Grove REIT.


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