X

Aviva Investors projects a strong growth outlook with upside risks

The global asset manager’s latest House View says that although uncertainties remain, the pandemic is passing, and successful vaccination roll-outs are allowing economies to reopen.

Download the full report here

Aviva Investors, the global asset management business of Aviva PLC, sees a potent combination of economic drivers underpinning a strong global recovery in 2021, resulting in an above-consensus outlook for growth. Although uncertainties remain, the COVID pandemic is passing, and successful roll-outs of vaccination programmes are allowing economies to reopen. Pent-up demand, large savings buffers and ongoing fiscal and monetary policy support will all help boost the recovery.

Despite worries about virus mutations and renewed lockdowns in a number of regions, businesses and households have shown themselves to be impressively resilient and resourceful. Successive waves of the virus have had less impact on real economic activity as both have adapted to sometimes rapidly changing circumstances.

Monetary policy is expected to remain supportive throughout 2021 and 2022, with recent changes in approach to meeting their inflation objective allowing central banks to keep policy looser for longer. The COVID reset has helped fuel major changes in the fiscal environment, with many countries shifting to bolder and larger interventionist demand management policies. The US is in the vanguard of such changes.

Michael Grady, head of investment strategy and chief economist at Aviva Investors, said:

“Given our strong growth expectations, as well as the balance of risks, we prefer to be overweight global equities, especially in US and UK markets. We are modestly underweight emerging market equities because of the anticipated headwinds from higher US bond yields, weaker local currencies and tighter domestic monetary policy.

“Higher sovereign bond yields largely reflect the brighter economic outlook as well as increases in public borrowing. Central banks maintaining rates near the effective lower bound will keep the short end of yield curves anchored, but there is scope for longer-term yields to rise further. As a result, we prefer to be modestly underweight duration.

“The upside from tighter credit spreads appears to be more limited, given the narrowing that has already taken place, so we prefer to be slightly underweight. We are mostly neutral on currencies, with the previous mildly negative view on the US dollar now more nuanced, given the more rapid growth trajectory expected there compared to other regions.”

 

Featured News

This Week’s Most Read

  • Price of scarcity: Central banks are driving large valuation premiums on assets with limited supply

    By Charles-Henry Monchau, CIO at Syz Bank It is important to understand the concept of scarcity to better understand its mechanics and its impact on markets. Scarcity refers to the

  • Why now is the right time to invest in Japan

    By Masakazu Takeda, lead portfolio manager of the Japan Focus All Cap strategy at SPARX Asset Management The issues that have plagued Japan over the years are now at the doorstep of

  • Why high yield bonds could be the next ESG frontier

    By Lila Fekih & Mark Remington, Co-Portfolio Managers of the New Capital Sustainable World High-Yield Bond Fund at EFG Asset Management  Equities have garnered the most attention in the ESG

  • Fundsmith hints at bumpy ride

    Terry Smith’s annual letter to shareholders reports a slight underperformance of the MSCI World Index over one year Despite the value rally, quality stocks outperformed in 2021 Smith says unexpectedly

  • Brooks Macdonald Funds under Management hit £17.3bn

    Brooks Macdonald today publishes an update on its Funds under Management (“FUM”) for its second quarter ended 31 December 2021, together with a Trading Update for the half year. FUM

  • Ninety One appoints Juliana Hansveden

    Hansveden to develop emerging markets sustainable equity capability Ninety One has today announced the appointment of Juliana Hansveden, CFA, as Portfolio Manager, Emerging Markets Sustainable Equity. In this newly created

  • Man GLG’s Atherton: Governance revolution in Japan like the UK in the 80s and 90s

    The ESG-driven corporate governance revolution in Japan is creating investment opportunities similar to those in the UK in the 1980s and 1990s, says Jeff Atherton, manager of the Man GLG

  • BlackRock launches two new active Climate Action funds

    The BGF Climate Action Multi-Asset Fund and the BGF Climate Action Equity Fund leverage BlackRock’s deep expertise in active sustainable investing with the objective of generating positive environmental impact.  As

  • US December CPI inflation rises 7% from a year ago

    David Goebel, Investment Strategist at Tilney Smith & Williamson, the wealth management and professional services group, comments on the latest US CPI inflation data: US December headline CPI inflation rose

Wealth DFM