Royal London Asset Management

Is economics a science? Many academics in the field would say "yes", and the way that the subject is taught today is based on this viewpoint.

The US S&P 500 Index hit its Covid low in March last year at 2237. Since then, it has more than doubled to stand at its current level of around 4500. For anyone who believes in efficient markets this is a mortal blow. To have one of the most liquid and closely followed markets in the world double in less than 18 months demonstrates that significant opportunities will periodically be presented to investors. Last March we noted this was the third big buying opportunity of our careers (September 2001 and the financial crisis being the other two – note the role of fear and panic). However, we have been surprised at how rapid this ascent has been.

Globalisation is a fact of life for us all – but whether it has been a ‘good’ thing or not depends on who you are. There is a view that globalisation has increased inequality. This is not true on a global scale.

This is turning out to be another strong year for equity markets. Year to date, the MSCI World index in now up 14.7% and the S&P 500 17.2% as of 5/8/2021. Is this justified?

With the recent launch of RLAM’s European Sustainable Credit Fund we now have a range of strategies offering exposure to sustainable credit bonds, including our multi asset funds.

I read with sadness about the death of David Thompson. I did not know him well but, from my perspective as an equity analyst in the 1980s, he stood out as a charismatic Chief Executive of Wolverhampton & Dudley, a regional brewer based in the West Midlands.

The focus in global fixed income markets continues to be on government yields and the question of whether they are telling us something about the future path of growth.

Bond markets are signalling The Great Rotation is over. After falling to 77bps on November 5 2020, the 10-year US treasury yield saw an increase to 177bps on the 31 March 2021.

I have recently got round to reading “1421 The Year China Discovered the World”. It is a fascinating theory that, during the Ming dynasty, the Chinese navy visited America, Antarctica, Greenland and Australia.

I was intrigued by a comment made by James Anderson, the manager of Scottish Mortgage Investment Trust – where he referred to the FTSE100 index being representative of a nineteenth century economy rather than a twenty-first century one.

Richard Marwood, Senior Fund Manager in the UK Equities team at Royal London Asset Management, discusses companies he likes, lessons learnt from 2020 and his outlook for the market in the year ahead.

Trust is really important. It underpins so much of what we do. I was reflecting on this listening to the latest revelations by Dominic Cummings about his time advising the Prime Minister. What struck me, perhaps surprisingly, was not what was said but the fact that it has been published.

The (in)famous ex Chair of the US Federal Reserve, Alan Greenspan, was well known for talking a lot without saying much, a key skill when his public pronouncements often moved markets. He himself came up with the famous quote “if you understand what I’m saying then you aren’t listening carefully enough”. This is a phrase that could be used for today’s markets. If you think you know what is going to happen next, then you don’t really understand what is going on. 

My anecdotal experience of inflation in the hospitality sector (a glass of wine and a pint of beer) got me thinking about how developed economies are placed for the present inflation challenge.

How we position our fixed income and cash funds to reflect their ESG, ethical and sustainability characteristics has been debated internally for several months. In light of the EU’s Sustainable Finance Disclosure Regulation, we have designated funds which fall under this regime as either Article 6, Article 8 or Article 9.

Inflation was again dominating headlines last week. On Wednesday UK CPI data for April showed annual inflation at 1.5%, in line with expectations. However, RPI at 2.9% was significantly above consensus; this was the largest gap between the two indices since November 2010.

The UN Sustainable Development Goals (SDGs) were launched in 2015 as part of the UN’s Sustainable Development Agenda. These were adopted by all UN member states as part of a common aim to end poverty, protect the planet and ensure that everyone could enjoy peace and prosperity.

Luck plays an important role in life. My colleague Azhar Hussain was talking to me about Biden’s 100 days and I reflected on a quote I heard on the radio last week: Boris Johnson has been lucky with his enemies. I think that could also apply to President Biden.