Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Staying invested amid new virus strain
News of the new Coronavirus strain Omicron has once again triggered fear and volatility in global markets, with investor sentiment taking a hit. The team at BlackRock’s Investment Institute has released its weekly commentary report with a simple yet effective message, “staying invested amid new virus strain.”
Sure, the new highly contagious virus strain could trigger growth downgrades, stall the economic recovery and have a significant sectoral impact, but the team is confident the vaccines and treatments already in place will safeguard against any permanent damage. If effective, this new strain will only delay the economic recovery. “We would lean against any stock market pullbacks. Less growth now means more later,” says BlackRock Investment Institute.
Don’t expect to see the same “Covid-Daniel Andrews”-style lockdowns this time around. BlackRock believes “Government restrictions will be lighter and more targeted than previous lockdowns.” The world has adapted, and the direction of travel is still up.
BlackRock says: “We see the Fed starting to gradually raise rates in 2022 as the economy no longer requires stimulus – assuming the virus strain does not derail the economic restart. This would push yields higher across the spectrum, keeping the outlook challenging for nominal bonds. We believe equities offer higher risk-adjusted returns and a potential buffer against inflation risks – especially as we see rates rising less than in previous hiking cycles – and less than markets expect.”
In BlackRock’s eyes, what really matters for long term investors is the sum total of growth and rate increases rather than the individual parts of timing. And it’s why the team has a broad preference for equities over nominal government bonds and credit.
The bottom line for BlackRock is that “Omicron could trigger growth downgrades, worsen risk sentiment and hit services sectors, especially in the near term. It could even question the restart if vaccines or treatments were to prove ineffective. If they are effective, the new strain only delays the restart… We are leaning against Covid-related stock pullbacks for now as a result.”
