At GAM Investments’ latest Equities Meeting, held on 2 March, two of our managers shared their thoughts on inflation, interest rates and corporate earnings.
Niall Gallagher – European Equities
The bulk of corporates beat full year earnings estimates, largely thanks to a combination of stronger revenues in the latter stages of 2020 and improved margins (cost controls). Recent earnings statements also give a sense that a reasonable level of underlying demand remains. There is evidence of inflation, especially in commodity markets. Inflation is something to pay close attention to as some companies are experiencing rising input costs and are passing on price increases to their customers in response. If these price rises stick and become embedded, a more persistent inflation may take hold. This may not necessarily be negative for stock markets overall but could have significant implications for stock market leadership.
Mark Hawtin – Technology Equities
We are seeing inflation in certain parts of the economy, although much of the disruptive technology universe actually acts as a disinflationary force. In our view, focusing on finding the right companies is paramount, while at the same time managing inflation and interest rate developments as they occur. Overall, we continue to believe certain parts of the market are overvalued (initial public offerings, retail investor names) but see significant opportunities across healthcare, transportation and industrials, boosted by 5G, AI and the Internet of Things or, as we describe it, ‘Digital 4.0’, the fourth generation digital revolution.
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is no indicator of current or future trends. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice. Reference to a security is not a recommendation to buy or sell that security. The securities listed were selected from the universe of securities covered by the portfolio managers to assist the reader in better understanding the themes presented. The securities included are not necessarily held by any portfolio or represent any recommendations by the portfolio managers.