Marcuard Heritage: Quarterly investment letter – 2nd quarter 2021
Our view on the market at a glance
- The world is reaching an inflection point in defeating the pandemic, resulting in a possible regime change in inflation, a steepening of the yield curve, equity sector rotation and possibly a revival of commodity prices.
- The US is powering ahead and its GDP growth will likely surprise on the upside with the latest fiscal stimulus programme of USD 1.9 trillion. The US is also ahead of Europe in terms of vaccine doses and defeating the pandemic. The question is to what extent will US consumers spend excess savings.
- According to Germany’s Finance Minister, the EU’s vaccination strategy is a “total nightmare”. Europe is still largely in lockdown and falling behind in defeating the pandemic. Consequently, the recovery is postponed to the summer.
- China’s GDP is expected to grow by +8.4%. That said, its economic activity has been moderating lately due to weakening domestic demand. At the National People’s Congress, the government announced plans to boost domestic consumption and to make the economy more self-reliant.
- Conclusion: We have a positive scenario over the next three to six months. That said, we have rarely seen so many fast moving parts all at the same time, which increase market volatility. The key question is what rising inflation will do to investors’ market perception and bond yields. In the end, all asset classes are leveraged to low bond yields. The outlook for low yielding long-duration bonds remains negative and our preference is on credit risk. Within equities growth stocks are at an inflection point and cyclical, commodity and value stocks have begun to shine again.
Please have a look into our complete Quarterly investment letter here