The market of work, the chains of supplying and the China. These are the three factors to be kept well monitored at this time of the year to overcome the end of 2021 on the financial markets without particular problems. The picture emerges from the report recently published by Planisfer Investment.
The recovery intact
The strength of the economic recovery in place will remain intact, fueled by an increase in request thanks to the post-pandemic reopenings and the increase in capital expenditures after the decade of low investment following the financial crisis. The realization of fiscal plans such as infrastructure spending in the United States and the European Recovery Fund can support the economic recovery, after the expected global slowdown of the last few quarters.
The factors to follow
But they are not lacking items of concern, in particular they can be highlighted three. Firstly, the labor market continues to be rigid due to workforce participation still below pre-pandemic levels. Then, global supply chains remain strained, pushing shipping costs up and hindering inventory supply and production. Finally, China’s slowdown could be prolonged due to the effects of the Delta variant and tight regulation on the private sector.
Between inflation and deflation
The first two factors are potentially inflationary while the third is in itself deflationary. Furthermore, rising energy prices globally may fuel the inflationary spike for several more months before supply problems can be resolved. The first two factors are potentially inflationary while the third is itself deflationary. Furthermore, rising energy prices globally may fuel the inflationary spike for several more months before supply problems can be resolved.
The unlikely stagflation
As for the taxi, the marginal reduction in demand for titles from State by central banks, combined with the previously mentioned inflationary factors, will likely lead to an upside. Fears about a stagflation scenario will continue to be at the center of the economic debate, but for now it seems to be a risk scenario and not the most likely one. In light of this outlook, we prefer a short duration position and exposure to positively correlated interest rate assets. We also continue to favor assets with exposure to the real economy and real assets, as well as positions on cyclical themes, both in equities and commodities.