This session examined the structural trends in the financial sector that have been either amplified or altered by the COVID crisis. It also examined whether post-COVID trends in the sector, such as the increased debt that has built up in the system, are likely to reinforce the lower for longer growth, inflation and interest rate regime or act as a catalyst for regime change. The speakers highlighted the most important waymarks for investors, including the intersection with post-crisis monetary and fiscal policy developments, offer thoughts on the likelihood of regime change and considered what that would mean for optimal capital allocation. The session also discussed the extent to which the financial sector’s resilience will be affected by physical and transition climate risk.
Click here to view Jeremy’s presentation slide[vc_quotes layout=”accordion” 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Key takeaways
It is important that fiscal policy now rotates from support to long-term stimulus. Outside the US where large public investment plans are underway, there is a danger that policy mistakes of the past will be repeated.
Inflation will be subdued going forward, with European economies, Japan, Australia, Korea and China struggling to meet long-term inflation targets.
Although remote working in the services sector could push down prices, the pandemic has also pushed up pay levels amongst low skilled workers.
People are confident in the banking sector but while some firms can handle their debt levels, others may have to restructure, and others may not make it at all. Corporate insolvency laws vary across Europe with different levels of efficiency regarding restructuring
Although central banks have opened the door to changes in the payment systems, they are reluctant to cede control or decentralise finance because of concerns around financial stability.
Central banks are looking closely at digital assets and involved in their evolution to ward off disruption from the emergence of private digital currencies.
Any transition from a heavily banked system or signal of a changing dynamic will see investors re-evaluate how they value the banking sector.
Any transition is a complex exercise for central banks whereby they can’t halt the arrival of new technology but have to marshal its progress and ensure it doesn’t weaken financial stability.
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
The world of zero interest rates presents a number of investment challenges and in our view calls for new ways of thinking in order to create new betas, new alphas, and new ways of constructing portfolios.
The highly-anticipated jump in U.S. inflation has arrived. While the sustainability of the increase remains open for debate, recent readings have surged and market-based indicators continue to show a surprisingly prolonged increase in inflation expectations.
The prospect of a sharp pick-up in inflationary pressures isbeginning to concern investors. Our historical analysis shedslight on how stocks, bonds and other asset classes behaveduring periods when inflation takes hold.
Countries that have experienced financial stress frequently lacked the amount of publicly available data that financially healthier nations readily provide.
The President’s proposal would add fuel to infrastructure themes in clean energy, data growth and an economic recovery, potentially strengthening an already attractive environment for listed infrastructure businesses.
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