Liontrust Views Autumn 2022 - Magazine - Page 6
LIONTRUST
OVERALL
• We continue to be positive about markets overall due to
central bank support, vaccine distribution and pent-up
corporate and consumer demand being released.
• But there are challenges to this view, from growth disappointments
to ongoing pandemic risks. While overall recovery continues,
the picture is becoming more nuanced as some countries,
especially in Asia, are falling behind in their vaccine rollouts.
The emergence of new virus mutations also remains a concern.
• While central banks such as the US Federal Reserve have
started to discuss reducing levels of support for the economy,
we see no serious prospect of this turning into reality in the
short to medium term.
EQUITIES
• This positive ‘risk on’ environment continues to favour equities.
• Stock market recoveries since the 2020 lows are largely
justified by government spending and corporate results. We
remain positive on valuations outside of US mega caps,
favouring cheaper regions such as Europe, Japan, emerging
markets and the UK.
• Our long-standing concerns about stretched valuations in the
US remain, especially at the more speculative technology
end, but 2021 earnings have surprised positively and even
this market is starting to offer better value.
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• Since the positive vaccine news emerged late last year,
there has been a far broader rally in stock markets amid an
ongoing global rebound, and this has seen more cyclical
and value companies catching up with the growth names that
dominated for most of 2020.
• Bond yields are also starting to rise after a long period
of decline and the general perception is that this tends to
penalise growth stocks.
• We are optimistic about smaller companies, with improving
economic activity thanks to the vaccine rollout providing
ongoing impetus for these largely domestic-orientated names
which tend to lead the way during periods of recovery.