Given the presence of some temporary factors driving inflation data, the markets are telling us investors are happy to run with the Federal Reserve’s narrative that inflationary pressures are transitory. We see this view reflected across asset classes.
BlackRock expect the ECB to maintain its current pace of asset purchases even as the economic restart gains traction. They wouldn’t view a decision to slow purchases as a hawkish policy signal, as the ECB is focused on keeping financing conditions easy. This, and a Federal Reserve that BlackRock see keeping policy easy, provides a positive backdrop for risk assets including European equities.
Improving macro data and continuously dovish central banks have kept equity markets well supported. Given the push and pull, the market continues to react to specific headlines and announcements, rather than the reopening trade as a general theme.
We might hear words like ‘Green Economy’, ‘ESG’ and ‘sustainable finance’ quite often, but what do they mean? Does Green Economy apply only to governments and big corporations? How can we, as individuals, be part of a better and more sustainable economy? This article will tackle all these questions and more.
The powerful policy revolution implies a lower future path of interest rates than markets are pricing in, even amid rising inflation over the medium term, as captured in BlackRock’s new nominal investment theme. Lower rates – even compared to their previous expectations – lift expected returns across asset classes over the strategic horizon and reinforcing BlackRock’s preference for equities over bonds.
During MeDirect’s second medirectalk for this year, Dr Sarah Newcomb, Director of Behavioural Science at Morningstar addressed the audience on “What Is Financial Well Being? – The Morningstar view”.
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Market attention to geopolitical risks has fallen to four-year lows. BlackRock believe this is justified, as investors appear more focused on the economic restart and inflation outlook and less concerned about geopolitics since the change in U.S. administration. Yet it’s worth watching specific risks as flareups can catch investors off guard when attention is low.
The debate around rising inflation and the potential impact on central bank policy has been the key driver for financial markets of late, and last week was no exception.
Hotter inflation has materialized and market volatility is rising as the economic restart gathers pace. This is playing out in line with BlackRock’s view that the economy is in a “restart” – not a traditional recovery. BlackRock prefer to look through any volatility and see a later “lift-off” from zero rates than markets expect. This means higher-than-expected inflation in the medium term, and underpins their pro-risk stance.
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