Monthly market blueprint - September 2021

Actions speak louder than words, however, and it is becoming apparent that the world’s de facto central bank is positioning for macroeconomic volatility. The data confirmed as much: US payrolls came in at a third of expectations and PMI indices in China and India suggested manufacturing stagnation. Manufacturing reports suggest that export orders are losing momentum, potentially indicating industrial weakness for the west in the next few months. Payrolls continue to be affected by the advance of the Covid-19 Delta variant, which keeps many parents/income-earners in a fluid condition.

Read our full update

Both the Fed and the ECB have been hesitantly talking about tapering asset purchases. In this volatile environment, however, it is difficult to see how central banks can reasonably justify the removal of ultra-accommodation. On the other hand, supply-driven inflation, a result of shortages and economic arrhythmia, could well continue to advance.

Despite the welcome dovish stance, investors need to remain vigilant. There is a very thin line between monetary exuberance driving equity and bond prices higher and the markets realising that central banks can neither control supply-side inflation nor exit quantitative easing. It is the thin line that not only separates buoyance from panic, but also one that, if crossed, may lead to a paradigm shift.

In other words, it is conceivable that we are drawing closer to the end of a twelve-year course where the underlying tenet of every investor was ‘Simply don’t fight the Fed’. This tenet may well be replaced with ‘The Fed is not the solution to literally everything’, opening up a whole world of opportunities -and risks. A paradigm shift is usually a volatile affair. It would allow the central banks’ political bosses less leeway to pander to the fringes and assign a greater impact and higher downside to the decisions of
governments.

However, we are not there just yet. Investors should remain diversified and patient with volatility. As portfolio managers, we try to ensure that we are active enough to recognise opportunity and that there are more ‘bets’ in our clients’ portfolios other than just equity ‘beta’.

Read more detail by downloading our full update below.

The economy and your investments webinar

Additionally, in our September 'The economy and your investments' webinar, our Chief Investment Officer and Chief Economist will examine the economic landscape for investors, whilst answering the questions on everyone’s minds. Register here.

How we can help

If you would like to know more about how we can help you manage, plan, or invest for your future, please get in touch.

Contact us today

Subscribe to our newsletter