A rise in US yields in anticipation of changes in official interest rates has unsettled markets recently, even as the US Federal Reserve has made it clear that it does not intend to tighten policy rates anytime soon. Market disbelief reflects strong economic data, among other things.
Equities have dropped, in part also due to the fall in the inflation expectations, but we expect only a temporary dip in price pressures. At the same time, we believe that higher interest rates reflect stronger (future) growth, which should be positive for equities.
And while the pace of vaccinations should pick up further, even as new virus variants emerge, it is our view that a more complete resumption of activities is likely later this year, adding to the positive backdrop for equities.
So which allocation to equities is appropriate now? And what about the other asset classes?
Watch the video with Daniel Morris, chief market strategist
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
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