In this week’s Market Pulse, Senior Research Analyst Dermott Aspell focusses on highlights and key takeaways from last week’s Goodbody Asset Allocation Committee meeting, including the decision to increase exposure to US short duration as an attractive risk return profile relative to cash.
- Equity markets were softer whilst sovereign bond yields rose slightly last week. No specific driver for these moves, however concerns on economic growth, reduction in central bank supports, higher inflation expectations and state intervention in China were factors. Fixed income weakness likely to have been driven by significant pick up in supply in both sovereign and corporate bond markets as primary market reopened after the summer.
- The Goodbody asset allocation team met last week and decided to increase exposure to US short duration as an attractive risk return profile relative to cash. The committee also expect lower growth levels but remain positive. Global growth forecasts look to have peaked at a high level and momentum has slowed in response to delta variant and supply side shortages. Momentum and forward looking indicators have slowed recently.
- The team expects inflation pick up to be transitory. Spike in inflation due to year on year effects and supply side constraints. Labour demand continuing to outstrip supply, which should ease as economies reopen and financial supports are reduced. Inflation expectations have risen in US and in particular Europe. We expect inflation to be transitory, however, expected to settle at higher levels than seen in the past five years.
