Business & Investment

Inflation strikes again. These investors are looking beyond that.

Inflation concerns have driven some investors out of the more expensive parts of the equity market, but many fund managers are convinced that this is just the way to go and equities can overcome the turmoil.

Tuesday’s fall was the third since mid-April, with the Stocks Europe 600 Index falling more than 1.4% in a single day. This is because market players are worried about rising prices and the outlook for high interest rates, which can undermine technology and growth appeal. stock. In each of the previous two declines, investors soon set out to buy, betting that the business cycle would continue to fuel the bullishness of stocks.

Martin Møller, Co-Head of Swiss and Global Equity at Union Banque Aprive in Geneva, said: “I think we’re still quite a while away.”

With stocks close to record highs, you wouldn’t be surprised to see this revision a little longer and deeper. The rationale behind ongoing optimism is that inflation can peak in a short period of time and the jump is due to technical reasons following the anomalous event of the Covid-19 lockdown. is. In this view, there is no fundamental change in the long-term outlook for restrained wages and prices.

“If we’re right on our assumption that inflation will peak soon, we shouldn’t be too worried,” Moeller said. “There may be some great anecdotes about expensive airline tickets, restaurant menus, etc., but all this is noise that disappears when the supply reacts again.”

The bearish view is that inflationary pressure Labor shortage In the United States, the stock market is already so highly valued that there is no room for error.

But for now, bulls say that a market decline that lasts longer than a day or two is healthy and could give investors cheap entry points and time to digest future inflation data. I’m sticking.

Here’s what other investors have to say about the inflation outlook:

Jean Boavan, Director of BlackRock Investment Research Institute

“Despite the Fed’s promise to lag behind the inflation curve through the new framework, the market is pricing with a lift-off from near-zero policy rates as early as next year, a strong restart. Be careful not to over-extract from strong short-term activity data during the process. The Federal Reserve has high standards for changing its policy stance, which is underestimated by the market. I think there is a possibility. “

Vantreon, Portfolio Manager, Oliver Sharping

“Currently, there are some real pains under the surface, but the background of equity risk assets remains very good in practice. The way we deal with them is in equity arbitrage and equity such as CTA. Overestimate the alternatives and focus on unique ideas rather than the broader sector. “

Quilter Investors, Portfolio Manager, Stuart Clark

“The market continues to be worried about the looming inflation surge, but forgets to look at noisy data to better understand the factors behind this inflation. Last year’s situation and the experience of the last decade. Given the deflationary environment, inflation has always skyrocketed year-on-year, but given how the market has reacted, they have been experiencing this inflation for some time, more than the central bank wants to raise rates. Seems to be worried that he is forced to react quickly. “

Clartan Associes, Managing Director of Germany, Patrick Linden

“Some people see the dynamics of the stock market these days as an overheat with little room to profit from current levels, while others expect a plausible short-term fix. Choosing the right stock based on both intrinsic quality and valuation is more important than ever. With this in mind, we invest fully in stocks in a mixed growth and value position. I am. “

Uwe Maderer, Head of Fixed Income, LBBW Assets and Wealth Management

“U.S. inflation is likely to accelerate further by about 4% year-on-year in May, and if oil prices follow a future curve, it will remain above 3% until early 2022. All add to the argument that the 30-year disinflationary period is over and pressures central banks to counter this trend. The stagnation period after 2022 is very likely to peak PMI. I think it’s high. Rising input costs slow recovery, and the move to green energy also limits potential growth in the future. “

Inflation strikes again. These investors are looking beyond that. Inflation strikes again. These investors are looking beyond that.

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