What comes after the reopening resurgence is certainly open to debate. Maybe financial markets are right about the medium-term outlook, and we will witness another economic experience like the last decade through the rest of this decade, but this is not our central expectation. We believe that inflation and economic growth outcomes will be less certain than they were in the 2010s, and we envisage a combination of hyperactive governments, reckless central banks, attempts to reduce wealth inequality, the implementation of the “green” agenda and resource scarcity all combining to create volatility in inflation and growth rates. This will present plenty of opportunity for nimble investors in the coming years. The last twelve months have been an abnormal period to adjudge the future for the global economy, but we think that just as the world changed in response to the global financial crisis, there will be significant shifts as we move forwards. At a macroeconomic level, these trends include governments spending ever more money they don’t have, increased government involvement across industry (especially in resources and green technology), a balkanisation of global supply chains and a continuation of the dominance of monetary policy, all of which are potentially exciting prospects for investors in a range of different ways.
Conclusion
In answer to my original three questions, there is obviously the potential that our views on global financial markets have become outdated. Indeed, we would admit that we have been forced to adapt some of our short-term investment views and expectations to reflect the fact that central bankers have temporarily changed the game through the liquidity gushes that they continue to direct into markets, resulting in higher asset valuations and lower potential returns. An investor who doesn’t behave with humility and employ mental flexibility leaves themselves vulnerable, at least in the short term. However, that doesn’t mean that such phenomena and distortions will persist forever.
Hopefully we have outlined today that the decade ahead and the wind of change howling around us provides both risks and opportunities for investors in many different forms, but our core views on investment remain constant to when we first started writing our “Views” all those years ago. We will continue to seek out methods of protecting our clients against inflation, which could prove very necessary in the years ahead. We respect the risks that exist in the geopolitical and political environments, and stick to our philosophy that balance and downside protection is vital, particularly at a time when others are so complacent. Finally, we stand by the mantra that the only real key to long-term investment success is buying attractively-priced assets; it has become more difficult in a world where value is hard to uncover, but we remain enthused by the prospects of those investments we currently own on our investment clients’ behalf.
