Resumo do Relatório
Global equities remain compelling, even after “jump” in interest rates
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As explained in our previous report here from Nuclo Independent CIO, periodically, we will be sharing in this increasingly powerful research platform “old” articles by our head of global equities Claudio Brocado. Our long-term approach to markets means that much of Claudio’s writing tends to have a long shelf life.
This article published by Seeking Alpha on October 5, 2018 seems extremely timely these days. We have read in reports here by our friend Jay Pelosky, and in presentations by the great Roberto Attuch, what happens to be our current view as well. There is no reason to be alarmed by the recent rise in interest rates and the steepening yield curve.
The markets are discounting what we increasingly see as an imminent globally-synchronized economic boom. Pent-up demand from long lock-downs will help propel a strong recovery in economic activity. How long that rebound is sustained remains a key question mark. Similarly, current market worries that inflation may be ready to make an important come-back seem overdone, in our view.
US inflation rates will experience a (temporary) bump well beyond the Fed’s target, but Chairman Powell has made it extremely clear that the US central bank will not overreact to such a temporary jump in prices. The key question here too is whether inflation actually retains on a more sustainable basis. Our base-case scenario remains that it will not.
Therefore, current market worries are likely to be just one more case of the pendulum of sentiment swinging from deflation/recession, very quickly back to overheating/inflation. As Claudio is fond of saying, time will tell…
