Portfolio Manager Brian Demain explains how expectations for faster economic growth and higher levels of inflation could lead to a market dynamic that equity investors have not seen for the past decade.

Key Takeaways

  • As expectations for economic growth and inflation rise, companies may experience different sources of margin pressure, as well as a new valuation paradigm in capital markets.
  • Policy makers may also be less willing to backstop market pullbacks, potentially ending the exceptional levels of capital appreciation experienced by equities in recent years.
  • In light of these market dynamics – one where a rising tide may not lift all boats – we believe investors need to be discerning, focusing on companies with strong competitive positions, capable management teams and proven profit models.