Alex Crooke: Markets are dancing to a slightly different tune these days; we're definitely seeing the same orchestra in the sense that it's central banks dominating liquidity and therefore the direction of markets. We've seen this almost for a decade, really, I think since the crisis of 2008-09. But the music's changing. We're seeing challenges around inflation rising. Jobs have been clearly hit by COVID and lockdowns, but they're recovering very sharply. So, do economies need the sort of liquidity and support the central banks are giving them, or are they giving them too much support? So, we're definitely seeing this mood music changing and markets therefore grappling with do we want recovery plays, do we want growth plays, which have served so well for 10 years, and whether leadership within markets is beginning to change.
So, from an equity perspective, what are we going to see in the coming months? Well, clearly, it's all about reopening. I think in Europe, U.S.’s vaccination rates mean economies can return to a sense of new normal. So, what does that mean for jobs, inflation, growth for companies? We're seeing big bottlenecks, actually, in terms of supply of key materials, semiconductors, industrials, finished goods. So, again, how does that affect price? Who are price takers? Who are price makers? So, again, in terms of the companies you want to invest with, clearly you want to be careful of those price takers; they may have trouble passing that cost on. You want the price … those that make the price.
We're also going to see, I think, more volatility in markets. We're seeing that around the growth-value dynamic. And we're seeing some weeks being quite volatile now, with setbacks and then recoveries. I think we should expect that as the market matures. And then equally, we're seeing change in leadership. So, some sectors performing much better. Those growth names are changing in terms of FANG stocks beginning to lose their leadership and markets broadening out, which again, I think is actually a healthy sign within the equity markets.
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