The Biden Plan in the United States and the Next Generation EU configure, in fact, the entry into a state capitalism of which there is no trace in recent economic history It is not certain that the expansionary policies pursued in the United States and Europe will generate higher inflation in the long run. Much will depend on the content of the plans and how they are implemented and financed. Market prices meanwhile discount the best of scenarios with room for growth limited to the sectors that have suffered most from the pandemic In the early months of 2021, the surge in US rates in the long part of the curve favored some sectors, banking and insurance in particular, a movement that now seems… Read more
The long wave of the new FED’s mandate
With the replacement of the inflation target (not 2% per annum but an average of 2% over the period), expectations of a rise in prices have grown First consequences: sale of long-term bonds, rise in yields, sales of equity with higher residual cashflow in their valuations (such as many Nasdaq companies) With the steepening of the curve, the use of bonds as a hedge instrument could return, putting an end to the long phase in which the two markets grew in parallel The progress of the vaccination plan also weighs on the investment choices. The sectors most penalized by the pandemic are once again interesting. The high valuations lay the foundations for sector consolidations ff The new course of the Federal Reserve… Read more
The (ephemeral) value of passive management
In 2020, as in the last decade, those who invested by reproducing the performance of the indices were rewarded even if they were exposed to high volatility The markets were once again fueled by liquidity generated in various forms by central banks which obscured the fundamentals of issuers and the economy For many this trend will continue because central banks have no alternative, but is it advisable to invest relying exclusively on this factor while the valuations of the financial markets are now double the historical average (S & P500) and the typical signs of an end of the cycle are multiplying out there? ff Better to passively go with the flow. The performance of investment made by professional managers over the… Read more