A precedent
Thus far, this market is pretty similar to the financial crisis. A sharp fall, followed by government and central bank action prompting a rebound. We also saw a rebound in inflation in 2010, but it petered out as technology, demographics and debt helped push it down. Inflation is also rising now – but is this due to technical year-on-year comparisons more than a longer-lasting increase? If it is, then the realisation that inflation was still dormant and rates very low would be very bullish for equities – even producing that final euphoric market high.
A sustained approach
The current environment is quite understandable, and an almost inevitable consequence of the lockdowns we saw last year and the necessary policy responses. As a sustainable investor, these can be difficult periods, as long-term trends are overlooked for short-term macro factors. Sectors such as mining and oil are a major part of equity markets and while current economic news makes these look attractive in financial terms, we believe that these are often not part of the solution to our becoming a more sustainable society.
By its very nature, taking a truly long-term view involves periods where the market is focused elsewhere. But we believe that the long-term effects of this pandemic are still to become visible: trends such as changing working habits, online shopping and greater awareness of the ability of external factors such as disease and climate to affect our lives, are powerful forces that will take years to fully play out.
Find out more about our range of sustainable funds at rlam.co.uk/sustainable
Mike Fox is Head of Sustainable Investments at Royal London Asset Management.
The value of investments and the income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested.
For professional clients only, not suitable for retail clients. This is a financial promotion and is not investment advice.
The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and are not investment advice.
Issued in June 2021 by Royal London Asset Management Limited, 55 Gracechurch Street, London, EC3V 0RL. Authorised and regulated by the Financial Conduct Authority, firm reference number 141665. A subsidiary of The Royal London Mutual Insurance Society Limited.
