Economic Outlook Q4 2021

· The last 18 months have been difficult and while plenty of uncertainty persists, it appears that the winds of change are finally blowing.

· The end of the pandemic appears to be on the horizon, finally, thanks to the combination of the global vaccination campaign and the development of highly effective therapeutics.

· With the resultant broader resumption of activity, the economic cycle is slated to evolve from the ‘recovery’ to the ‘expansion’ phase. While that maturation comes with a moderation in the pace of growth, the further absorption of slack over the coming year should still mean growth at stronger rates than prevailed over the decade before the pandemic hit.

· The growing indications that the trajectory of the global economy is on a positive track and inflationary pressures are building has also resulted in a shift in the approach to fiscal and monetary policy, with policymakers turning their focus from supporting an economic recovery to maintaining expansion. As such, we can anticipate crisis-era stimulus to fade in the months ahead.

· Monetary policy is, however, set to remain on the ‘easy’ side of the dial for the foreseeable future as the unwind is likely to be gradual. That said, the broad trend for market interest rates is likely to be higher from their still historically depressed levels.

· Against this backdrop, bonds appear unattractive while the generally constructive, albeit still challenging, outlook favours exposure to risk assets that can continue to benefit from an environment of strong growth and ample liquidity.

View the full analysis below.


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