Better times ahead?

Free from a house view on economies, markets or stocks, J O Hambro Capital Management’s (JOHCM) fund managers invariably see the world in different ways. We asked a number of our managers for their thoughts on the outlook for their asset class next year, what they would like to see and the possible surprises that 2021 could bring.

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F O R E W O R D

 
   

Aled Smith | Investment Director

J O Hambro Capital Management

Reflecting on 2020, in aggregate, it is amazing how nimble our “Amazonified” economies have proved to be. However, if you were in the

parts of the economy that saw health concerns and government policy switch off supply, then it has been a very painful year indeed.

We saw an unprecedented fiscal and monetary response to stave off depression and mass unemployment, and with it a surge in sovereign indebtedness. Debt levels in major economies have attained the same level as the end of WWII and governments are likely to play a bigger role in economies and markets after the pandemic is over.

Will this massive effort by governments and central banks to keep economies alive unleash long-dormant inflationary pressures as economic growth normalises and demand recovers? The powerful structural forces that have played out over 40 years to deliver the current inflation regime will not be undermined easily. We can argue about supply and demand but it is really politics that tips the balance in favour of inflation, and politics are changing. We must remain vigilant to major shifts in the interest rate and inflation regimes.

The outlook for returns from fixed interest is challenged from here. In equities, in only a matter of months, attitudes to risk have changed dramatically. The pandemic still leads the news coverage, but there has been an emotional shift from the need for safety to return- seeking.