14 September, 2020

Investment Outlook – Navigating the New Normal

The latest edition of Investment Outlook looks at the new normal we are all coming to know from the impact of Covid-19, as well as focusing on total return from investments – not just income return. This link takes you to our August publication of the Investment Outlook – Navigating the New Normal.

Amongst the topics covered in this edition we highlight:

A New Normal

The adverse impact of Covid-19 has been less than originally expected by many commentators. In part this reflects the significant stimulus, both from central banks and more importantly from governments. However, this will not avoid a short recession. While the response to Covid-19 has had many short-term impacts, it has also significantly accelerated numerous long-term trends. Furthermore, due to the massive rise in government debt globally we expect interest rates will likely remain low for several years and after a brief deflationary period inflation will accelerate to around 3% or more.   

We include sections on:

  • Companies that are expected to benefit from the economic recovery. 
  • Companies whose revenue is linked to inflation that should benefit from the expected long-term sustained rise in inflation. 
  • Companies that are expected to generate solid income streams for investors. 

The Motels – Total Return

It is very easy for investors to focus on the tangible interest and dividend returns of their investments, and less on the volatile capital appreciation component which appears to be more intangible. This ignores a potentially very large component of investment return. With interest rates and dividend yields being low, periodically realising a portion of capital appreciation is a real option.

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