Will the COVID-19 crisis mean we will be trapped in the lower for longer regime or are we on the road to a rate change? This session examined the proposition that we are in a “lower for longer” environment, explored whether a reflationary environment will prevail, and debated if growth is around the corner. The session also highlighted what these potential scenarios might mean for investors and identify opportunities from an investment perspective. [vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Robert%20Tipp%22%2C%22job_role%22%3A%22Chief%20investment%20strategist%20and%20head%20of%20global%20bonds%2C%20PGIM%20Fixed%20Income%20(United%20States)%22%2C%22content%22%3A%22Robert%20Tipp%2C%20CFA%2C%20is%20a%20managing%20director%2C%20chief%20investment%20strategist%2C%20and%20head%20of%20global%20bonds%20for%20PGIM%20Fixed%20Income.%20In%20addition%20to%20co-managing%20the%20global%20multi-sector%20strategies%2C%20Tipp%20is%20responsible%20for%20global%20rates%20positioning%20for%20core%20plus%2C%20absolute%20return%2C%20and%20other%20portfolios.%20He%20has%20worked%20at%20the%20firm%20since%201991%2C%20where%20he%20has%20held%20a%20variety%20of%20senior%20investment%20manager%20and%20strategist%20roles.%20Prior%20to%20joining%20the%20firm%2C%20he%20was%20a%20director%20in%20the%20portfolio%20strategies%20group%20at%20the%20First%20Boston%20Corporation%2C%20where%20he%20developed%2C%20marketed%2C%20and%20implemented%20strategic%20portfolio%20products%20for%20money%20managers.%20Before%20that%2C%20he%20was%20a%20senior%20staff%20analyst%20at%20the%20Allstate%20Research%20%26%20Planning%20Center%2C%20and%20managed%20fixed%20income%20and%20equity%20derivative%20strategies%20at%20Wells%20Fargo%20Investment%20Advisors.%20He%20received%20a%20BS%20in%20Business%20Administration%20and%20an%20MBA%20from%20the%20University%20of%20California%2C%20Berkeley%20and%20holds%20the%20Chartered%20Financial%20Analyst%20(CFA)%20designation.%22%2C%22image%22%3A%2244325%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Frobert-tipp-1904583a%2F%22%7D%2C%7B%22name%22%3A%22Sushil%20Wadhwani%22%2C%22job_role%22%3A%22Chief%20investment%20officer%2C%20QMAW%20(United%20Kingdom)%22%2C%22content%22%3A%22Dr.%20Sushil%20Wadhwani%2C%20CBE%2C%20is%20the%20chief%20investment%20officer%20for%20QMAW%2C%20originally%20founded%20as%20Wadhwani%20Asset%20Management%20in%20October%202002.%20Prior%20to%20joining%20QMA%2C%20he%20served%20as%20the%20founder%20and%20chief%20executive%20of%20Wadhwani%20Asset%20Management.%20Previously%2C%20he%20was%20a%20member%20of%20the%20monetary%20policy%20committee%20at%20the%20Bank%20of%20England.%20He%20also%20served%20as%20the%20director%20of%20quantitative%20systems%20at%20Tudor%20Investment%20Corporation%2C%20director%20of%20equity%20strategy%20at%20Goldman%20Sachs%2C%20and%20as%20an%20academic%20economist%20at%20the%20London%20School%20of%20Economics.%20He%20is%20an%20emeritus%20governor%20at%20the%20London%20School%20of%20Economics%20and%20a%20Commander%20of%20the%20Order%20of%20the%20British%20Empire.%20He%20earned%20a%20BSc%2C%20MSc%20and%20PhD%20from%20the%20London%20School%20of%20Economics%20and%20Political%20Science.%22%2C%22image%22%3A%2244327%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Fsushil-wadhwani-32635496%2F%3ForiginalSubdomain%3Duk%22%7D%5D” title=”Speakers” el_class=””][vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Amanda%20White%22%2C%22job_role%22%3A%22Director%20of%20institutional%20content%2C%20Conexus%20Financial%20(Australia)%22%2C%22content%22%3A%22White%20is%20responsible%20for%20the%20content%20across%20all%20Conexus%20Financial%E2%80%99s%20institutional%20media%20and%20events.%20She%20is%20responsible%20for%20directing%20the%20bi-annual%20Fiduciary%20Investors%20Symposium%20which%20challenges%20global%20investors%20on%20investment%20best%20practice%20and%20aims%20to%20place%20the%20responsibilities%20of%20investors%20in%20wider%20societal%2C%20and%20political%20contexts%2C%20as%20well%20as%20promote%20the%20long-term%20stability%20of%20markets%20and%20sustainable%20retirement%20incomes.%20She%20is%20the%20editor%20of%20conexust1f.flywheelstaging.com%2C%20the%20online%20news%20and%20analysis%20site%20for%20the%20world%E2%80%99s%20largest%20institutional%20investors.%20White%20has%20been%20an%20investment%20journalist%20for%20more%20than%2020%20years%20and%20has%20edited%20industry%20journals%20including%20Investment%20%26%20Technology%2C%20Investor%20Weekly%20and%20MasterFunds%20Quarterly.%20She%20was%20previously%20editorial%20director%20of%20InvestorInfo%20and%20has%20worked%20as%20a%20freelance%20journalist%20for%20the%20Australian%20Financial%20Review%2C%20CFO%2C%20Asset%20and%20Asia%20Asset%20Management.%20She%20has%20a%20Bachelor%20of%20Economics%20from%20Sydney%20University%20and%20a%20Master%20of%20Arts%20in%20Journalism%20from%20the%20University%20of%20Technology%2C%20Sydney.%20She%20was%20previously%20a%20columnist%20for%20the%20Canadian%20publication%2C%20Corporate%20Knights%2C%20which%20is%20distributed%20by%20the%20Globe%20and%20Mail%20and%20The%20Washington%20Post.%20White%20is%20currently%20a%20fellow%20in%20the%20Finance%20Leaders%20Fellowship%20at%20the%20Aspen%20Institute.%20The%20two-year%20program%20consists%20of%2022%20fellows%20and%20seeks%20to%20develop%20the%20next%20generation%20of%20responsible%2C%20community-spirited%20leaders%20in%20the%20global%20finance%20industry.%22%2C%22image%22%3A%2235225%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Famanda-white-101a7515%2F%3ForiginalSubdomain%3Dau%22%7D%5D” title=”Moderator” el_class=””][vc_empty_space height=”10px”]
Key takeaways
Inflation has become the number one investor worry according to a poll of delegates at FIS Digital 2021 with 51 per cent of respondents naming rising prices above any other risk.
But it might not be long-term. Country by country and demographic drivers are disinflationary, and today’s robust economic activity will tail off and economies will turn as sluggish as 2019.
Other panellists argued inflation could remain uncomfortably high. Even transient factors can take a while to unwind – particularly a labour shortage.
The longer inflation stays high, and the less pre-emptive central banks are in trying to curb it, the greater the risk.
Investors face challenges keeping to strategic asset allocations and navigating the impact of lost diversification between stocks and bonds.
One popular strategy comes via increased allocations to commodities where low inventories has left many commodity markets in backwardation. But looking ahead factors like China prioritising financial stability over growth could quickly change the picture. Moreover, if central banks turn hawkish, it bodes badly for industrial metals.
Elsewhere commentators said taxes will rise and this means deflationary forces could hold back the demand side. Systemic forces will also drive down inflation – taming inflation won’t just be the responsibility of central banks.
Many pension funds’ portfolios are not designed for unanchored inflation. Insurance assets like inflation-linked bonds or commodities are good in the short-term but don’t fit easily in a long-term portfolio.
Central bank credibility has provided an extraordinary backdrop to investment decisions – and any sense that discipline might be eroding could end badly for the portfolio.
What do you consider to be the biggest risk facing your portfolio right now?[vc_line_chart x_values=”” values=”%5B%7B%22title%22%3A%22Geopolitical%20risk%22%2C%22y_values%22%3A%2212%22%2C%22color%22%3A%22blue%22%7D%2C%7B%22title%22%3A%22Volatility%20of%20markets%22%2C%22y_values%22%3A%2222%22%2C%22color%22%3A%22pink%22%7D%2C%7B%22title%22%3A%22Inflation%20%22%2C%22y_values%22%3A%2251%22%2C%22color%22%3A%22mulled-wine%22%2C%22custom_color%22%3A%22%238d6dc4%22%7D%2C%7B%22title%22%3A%22Liquidity%22%2C%22y_values%22%3A%227%22%2C%22color%22%3A%22juicy-pink%22%2C%22custom_color%22%3A%22%236dab3c%22%7D%2C%7B%22title%22%3A%22Climate%20risk%22%2C%22y_values%22%3A%228%22%2C%22color%22%3A%22peacoc%22%2C%22custom_color%22%3A%22%2300c1cf%22%7D%5D”]
The big difference between the vaccine rollouts and the scale of the stimulus measures across the world could result in a K-shaped global economic recovery, with much of the developed world booming but poorer countries continuing to struggle. However the
This session examined how the digitalization of economies and the shift to renewable energy offer potential long-term growth opportunities in infrastructure; and how it can play a role in long-term investor portfolios.
Is distressed an indicator of public market activities. Given the recovery in markets, what does that mean for the opportunity in distressed? Will we see a divergence in the bond and equity markets? What are the regional differences and where are the opportunities?
This session looked at the biggest risks that asset owners are facing in this environment over the next 2-3 years as a result of the major shifts to near-zero interest rates, coordinated monetary and fiscal policy (MP3), and heightened internal and external conflict.
Leave a Comment
You must be logged in to post a comment.
Login