Aviva Investors, the global asset management company of Aviva PLC, predicts a rapid and widespread recovery from the coronavirus pandemic for the remainder of 2021 and into 2022. Global growth is expected to exceed 7% this year and approach 4.5% next year, with an upward revision outlook for these two periods. The virus is expected to persist for some time, but the most serious upheavals due to the lockdowns are over, with the vaccination campaigns underway, the various adaptations on the part of the population and businesses and the support policies still in force.
The reopening of economies led to a strong recovery in demand while supply struggled to keep up, causing bottlenecks that led to the emergence of some inflationary pressures. These are expected to be mostly transient, but core inflation will likely remain somewhat higher than its pre-COVID-19 level.
Monetary policies should therefore remain accommodative this year and next, since the recent changes in approach by central banks to achieving their inflation target will allow them to maintain a more flexible policy over a longer period. Emergency aid will be gradually lifted as economies reopen, but more proactive public spending initiatives should multiply, particularly in the United States, where programs in favor of the environment and the digital should be priorities.
Michael Grady, Director of Investment Strategy and Chief Economist at Aviva Investors said :
“Our optimistic stance on the outlook for reflation, as well as the ongoing political support, leads us to favor an overweighting of equities, with a preference for the United States and the United Kingdom. This position is offset by an underweighting in emerging markets, which could suffer from rising US rates, weakening local currencies and tightening national monetary policies.
We expect the outlook for growth and inflation to put some upward pressure on long-term sovereign bond yields, while in the United States the Fed sticks to its new regime. fixing of average inflation. As a result, we prefer to underweight somewhat the duration1, mainly through US Treasuries.
The potential for tightening credit spreads seems limited, given the movement already observed. We therefore prefer to be slightly underweight in investment grade rated bonds.2 and neutral on High Yield bonds2 (high yield). Finally, we are adopting a broadly neutral position on currencies ”.
1 Duration corresponds to the weighted average life of a bond or a bond portfolio expressed in years.
2 “High yield” speculative bonds have a lower credit rating (from BB + to D according to Standard & Poor’s and Fitch) than “Investment Grade” bonds (rated from AAA to BBB- according to Standard & Poor’s and Fitch). due to the more fragile financial health of their issuers according to the analyzes of rating agencies. They are therefore considered to be riskier by the rating agencies and in return offer higher returns.
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About Aviva Investors
Aviva Investors is the trade name of the asset management arm of the Aviva plc group, one of the world’s largest insurers. Represented in fifteen countries, Aviva Investors manages more than 408 billion euros in assets at the end of 2020 across a wide range of products and investment solutions. Aviva Investors offers the advantages of an international dimension combined with local know-how.
Aviva Investors France
Marion Duchêne – [email protected] – Tel : +33 (0)6 46 47 09 79
Anne-Marie Cravero – Tel: +33 (0) 6 11 19 20 68
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