We try to see the investment world as we think it should be seen – with a fundamental investment perspective.
Economic growth is going to be subdued for some time, with variation by sector.
Central bank monetary easing to stimulate growth has taken financial markets into uncharted territory.
Government debt growth to fund fiscal policy to stimulate economic growth, and corporate debt growth, continue to grow and this is unsustainable.
Deflationary pressures have been present for many years now, and present a problem when inflation is needed to erode the extraordinarily high levels of debt. Inflationary pressures and expectations, interestingly, are being seen for the first time in a long time. The tension between deflationary and inflationary views is increasing market volatility.
Medium-term, in our view, the most likely market environment will be economic growth that continues to be slow and sluggish at best, coupled with inflation.
For investors, unfortunately, this will be a most difficult environment in which to preserve and grow real wealth, particularly if inflation increases significantly.
Currently, US equity markets offer extremely poor value and other equity markets and conventional bonds offer poor value relative to risk.
Investment with perspective is necessary to navigate uncharted waters.
Note that the investment views above are as at 15 April 2021 and are subject to continuous and ongoing review so may have changed since.
Currently, our portfolio is more different than ever from conventional investment portfolios: our equities exposure is positioned to profit from a significant fall in equity markets although we do have exposure to equity investments that we believe are at reasonable valuations and will appreciate; we have limited exposure to very short-dated bonds; we have exposure to precious metals and producers; we have exposure to real estate opportunities with decent expected returns; and, we have a significant allocation to alternative investments.