Despite the high returns of markets, the global economy has not yet fully reopened and more than half (57%) of strategists predict that it will take another six to nine months for the reopening process to fully unfold on a global scale.
Thus emerges from a survey carried out by Natixis Investment Managers, which was attended by 42 experts, according to which even though the market is experiencing the first real increase in inflation in the last 13 years, the biggest risk for investors could be complacency. Overall, it is widely believed that investors should, however, monitor risks and beware of potential obstacles. One of the main market trends that emerged during the pandemic was the rotation in favor of value. Looking at the second half of the year, 64% of respondents say that value still has a few months of racing ahead of it, while only a quarter (26%) believe that its outperformance can continue for a few years. Only 10%, on the other hand, believe that its rally is now over, an opinion more widespread among 21% of strategists who imagine a market stalemate for the last two quarters of the year. “For value to continue to outperform, we would need inflation to prove transient and for the federal government to increase its tax spending,” he says. Chris Wallis, Chief Investment Officer, Vaughan Nelson Investment Management.
Markets influenced by the Fed
Of all the factors that could affect market performance in the second half of 2021, strategists recognize the relevance of the Fed’s behavior. emerging markets in the second half of the year they are in fact linked to the Fed: the outperformance of emerging markets depends on the stability of the dollar and interest rates. Taking into consideration two of the major investment stories that emerged from the pandemic, Natixis strategists have shown the most conviction when it comes to ESG investing. Throughout the duration of the pandemic, the ESG strategy they generated very solid results both in terms of returns and asset growth. While cryptocurrencies have made headlines over the past year, none of the 42 strategists who participated in the latest survey frame cryptocurrencies as a viable alternative to traditional currencies.
Finally, the survey shows that respondents have actually seen little change compared to last year with regard to possible winners. This year, preferences go to technology (88%), healthcare (83%), ESG investments (76%) and residential construction (74%). Since nearly six out of ten strategists (57%) put in the winners column the stay-at-home economy, it seems that many think it will take some time before the theme of returning to the office resurfaces. Beliefs are not as strong when it comes to energy (38% winning versus 62% losing) and travel (52% winning, 48% losing), thus adopting a perspective that aligns with a full reopening in the first half of 2022 rather than in the latter half of 2021.