Have you ever stopped to imagine what would happen if the world’s central banks spent just over a decade pouring USD 25 trillion of liquidity into the economy with more than 60% of that liquidity created in the last two years? In this article, we’ll try to assess what has happened and think about how investors should navigate the next phase of the greatest financial experiment of all time.
The outlook is currently challenging. Tightening is coming, but it is not here yet and in the meantime current policy remains quite accommodative. There is no doubt that extremely easy policy boosted equity prices, which were reinforced by strong earnings. Still, we believe organic growth can continue.
Asian stocks had a tough start to 2022 amid concerns that persistent inflation could cause any tightening by the US Federal Reserve (Fed) to be more aggressive than expected. For the month, the MSCI AC Asia ex Japan Index fell by 3.10% in US dollar (USD) terms.
Increasing expectations of a more aggressive Fed tightening cycle have led to a sell-off in US Treasuries. We share our thoughts on what this means for investors in 2022 and discuss our outlook for Asian bond markets.
We see the volatility in the New Zealand markets as an opportunity to focus on new companies for which we have a high degree of confidence in their earnings.
Inflation is creating challenges for the New Zealand bond market and economy. In line with bond markets around the world, New Zealand’s market has had a difficult start to 2022. Bond yields and interest rates in general have been climbing as central banks hike rates to tackle soaring inflation.
We highlight the increasing importance of engagement in Japan, explain how it could be the key to unlocking the long-underperforming Japanese market’s potential, and assess how it can lead to the generation of alpha.
Going back to India for a month after two long years of not being able to visit my family, I was pleasantly surprised by the new normal. While there has been much adversity, COVID-19 has also sparked positive change, especially on technology adoption.
It would not be surprising if the major swings in the markets and macroeconomic conditions, including historic central bank shifts, have made most investors somewhat seasick. Recently on a day-to-day basis, markets seem to react quite irrationally, but the overall backdrop is fairly clear: the markets are getting accustomed to one of the most rapid and major shifts in Federal Reserve policy ever in its history.
An ability to look forward to better times and remain optimistic is invaluable. These attributes are no less helpful when investing in equities. Whilst you can get an unpleasant surprise from misjudging the direction of the tide while enjoying your picnic, the consequences for misjudging the direction of the liquidity waves look more pronounced than ever as we enter 2022.