Asset Allocation

While the US and Europe have chosen the path of unprecedented fiscal spending and monetary easing, China is doing the accept opposite. On the long term, this will lead to an appreciation of the renminbi and a depreciating dollar which will push inflation higher in the West, argues GaveKal founder Charles Gave in his latest monthly contribution to Investment Officer.

The emergence of inflation is particularly hotly debated at the moment. Is the current uptick in commodity and other input prices sufficient to cause an inflation surge? Opinions differ widely, as is evident from the views of various asset managers.

Optimism about an imminent end to the coronavirus lockdowns and the announcement of substantial financial support packages has boosted value stocks worldwide, and Japan has been no exception. But in the land of the rising sun, the value rally already seems to have run out of steam. Richard Kaye, manager of the Comgest Growth Japan fund, knows why.

US stocks are historically expensive. But this applies in particular to large caps. Small caps are still cheap, despite a strong price rally in the past six months. ‘On average, the companies in our portfolio trade at around 11 times earnings,’ says Blake Harper, one of the managers of the Orchard US Small Cap Value Fund.

Growth in the Asian stock market no longer comes from big tech companies. The best growth opportunities now lie in young, smaller technology companies and in the rapidly emerging healthcare sector, says Albert Kwok, manager of the PGIM Jennison Emerging Markets Equity Fund.

Elon Musk’s announcement by tweet that Tesla’s customers will soon be able pay for their car in bitcoin has triggered a discussion about the viability of the digital currency between investment banks and asset managers. Should bitcoin be included in investment portfolios or shouldn’t it?

Investors have always worried about what rising bond yields mean for markets. But today, such fears appear unfounded, argues Daniele Antonucci, Chief Economist at Quintet Private Bank.

Small caps have shown stellar performance this year, helped by an improved economic outlook. Valuations have risen, so are there still opportunities for investors? We asked Jan Willem Berghuis, head of small caps at Kempen Capital Management.

In recent weeks, the €1.2 billion Kempen Global Smallcap fund has taken profits on the biggest risers, adjusted weightings and spent time on new investment ideas, says Berghuis.

The rally in commodity prices has only just started and has much further to go, according to Phillippe Gijsels, head strategist of BNP Paribas Fortis. This is due to a powerful combination of increasing demand and supply constraints due to years of underinvestment in the sector.

Pets are not just fun to have around, they are also an excellent investment. ‘The pet economy is growing faster than the economy as a whole every year, because it benefits from a number of megatrends that are converging,’ according to Andreas Fruschki, manager of the Allianz Pet and Animal Wellbeing fund.