Investment insights - December 2021 

Please find below our publication "Investment insights" which will give you our vision of the market and our 3 months scenario.

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THE ENDLESS TIMING OF ‘WHAT COMES NEXT?’

The Advent calendar is thought to have originated in Germany in the 19th century as a symbol of time and a lesson in patience. The calendar was originally meant just for children and contained only religious illustrations. Since then, it has been reshaped entirely. There are now Advent calendars for all ages, tastes and budgets. But one thing hasn’t changed – the lesson of the value of patience.

November was an event-filled month that tested the morale and patience not just of investors, but of companies and, well, all of us. As the month began, one of the calendar “windows” opened up to reveal a surprise from the Bank of England, which ultimately chose to keep its interest rates unchanged, contrary to what it had flagged to the markets up till then. Also in Great Britain, COP26 went into overtime, with endless wrangling over an agreement that was generally deemed disappointing. On the other side of the Atlantic, the Fed’s flagging of an acceleration in its tapering caught investors wrong-footed late in the month and raised fears of slower growth. Several other calendar windows opened up to reveal ever more facets of Covid-19, including its fifth wave, a new variant and so on. In fact, with inflation continuing to come in above forecasts, the only good news was in economic statistics.

All this pushed investors into less risky assets. With the exception of the MSCI World, which, thanks to the S&P 500, ended November slightly in positive territory, most markets ended the month down, including euro zone equities, global fixed income, Brent and others.

In light of the above, we are making no changes to our central scenario (to which we assign a 55% probability) of a gradual normalisation, with inflation thought to be transitory. This scenario assumes further normalisation of interest rates and moderate equity market gains. Our first alternative scenario (35% probability) continues to assume high inflation and a reduction in central bank support. This would mean a steeper rise in bond yields and falling equity markets. The second alternative scenario (10% probability) assumes a return of the public health crisis, which would trigger social distancing measures, as well as falling bond yields and falling equity markets, albeit on uneven trends.

STRATEGY - COP 26 : Generally disappointing despite the initiation of some important agreements

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Overview of our market scenarios as of 30 november 2021

Scénario Central : Gradual normalisation with inflation deemed transitory

Alternative scenario 1 : More inflation, less central bank support 

Alternative scenario 2 : Return of the public health crisis

Our next publication will be published in january 2022. Our teams are at your disposal for any complimentary information.