It’s a careful balancing act that involves slowing the economy and then cutting rates quickly enough if they go too far. So far, the signs indicate that central banks are approaching the peak of the cycle, which will leave them room to cut interest rates in the future. So far, the government and companies are holding firm, but the shortage of jobs (caused by Brexit/ Covid retirees/ demographics) in certain sectors is leading to pockets of significant increases which remains a concern. Inflation starting to fall and heading towards zero or negative numbers.Īll the data we have leads us to believe that this is already happening. This time, we’ll have to grind our way out the hard way and the variety of data points being watched means it’s more likely to be a bumpy ride. This time we don’t have those magic bullets. With Covid, we had the added advantage of a vaccine.
When we look at the preceding two bear markets, the Credit Crunch and Covid-19, the catalyst for markets to bounce back was huge stimulus from the central banks in the form of quantitative easing. The road to recovery is usually littered with setbacks, diversions and even the odd roadblock.
Whilst this brings me a degree of confidence that the recovery is happening and is likely to replace the losses in fairly short order, we must be cautious.
The shape of the recovery is similar for our other funds with the greatest gains following the greatest losses.
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