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
Over the past year, the COVID-19 pandemic has accelerated the shift to a new paradigm for economies and markets, characterized by near-zero interest rates, coordinated monetary and fiscal policy (Monetary Policy 3/MP3), and heightened internal and external conflict.
Head of Global Infrastructure, Ben Morton shares why we see the proposed spending package and tax changes as a clear positive for listed infrastructure.
In 2020, there are 4 very powerful and visible phenomena, the convergence of which is likely to bring tremendous change and disruption, much of which will be at the expense of incumbent business models and with significant investment implications.
The rapidly increasing administration of COVID-19 vaccines, coupled with the imminent flood of fiscal stimulus from the American Rescue Plan Act, has generated widespread expectations that the US economy will boom in the second half of 2021.
Climate change is one of the defining issues of our age. Its physical manifestations are negatively affecting ecosystems, human health and economic infrastructure. The transition to a zero-carbon economy presents significant challenges, but also opportunities for investors.
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