Are we entering a “returning to growth” phase for economies and markets? GAM fund managers tell their stories.
Adrian Owens, Investment Director at GAM, shares his views.Returning to Growth
It seems that growth is coming back, but there may be a risk premium that remains in markets until we have a vaccine. In the meantime, there are several interesting themes that are emerging.Adrian Owens
Even if there is a second wave of infections, will we remain out of lockdown?
Based on current evidence, it seems at the moment that authorities will attempt to deal with further infections on a local level. We saw this recently in Texas, when the governor halted the state’s near-term reopening plans. That said, policymakers are likely to do everything they can to keep the economy open. If hospitals become overcrowded, then drastic action would probably be taken; however, we appear to be moving in the correct direction, with fewer deaths and further economic re-openings.
Are we entering a ‘return to growth’ phase for markets and economies?
It does appear as though economies are returning to some form of growth. I believe it could be dangerous to extrapolate this over the stock markets, which have performed well recently in light of the monetary and fiscal measures taken by governments. At the moment, it seems the growth outlook may be quite fitful.
What does this mean for your asset class?
Looking ahead, we feel there are many opportunities for the asset class. It seems that growth is coming back, but there may be a risk premium that remains in markets until we have a vaccine. In the meantime, there are several interesting themes that are emerging. If we bounce back and the economy strengthens, we feel the currently muted inflation expectations will rise. Similarly, if the economy stagnates, then policymakers will likely respond with greater liquidity. Longer term, ultimately that could indicate a risk of higher inflation. In the US, investors anticipate inflation to average 1.3% over the next 10 years, but I think this number could be higher.