As vaccine wars hot up and markets worry about interest rates and central bank action, the theme of price distortion continues to unsettle valuations. One aspect of distortion is in the increasing weight being put on ESG metrics – which should be market positive, but look to be vulnerable to Woke-like “doubleplusungood” groupthink, potentially further distorting markets.
Central Banks are playing the “lower for longer” interest rate card to reassure markets on growth. There are always consequences of such actions – ranging from bubbles, delusion and fraud. Eventually consequences trigger change, and reassessment – which is driving the rotation from Hope as a Strategy Tech into Fundamental stocks – Autos are a good example.
What is going on in Europe? The political and economic options are limited, the outcomes predictable, and none of them are good. But don’t worry - Europe can always blame the UK and AstraZeneca.
Consequences are unavoidable. Pension savers are crushed by interest rate repression and the changing demographics of Covid, while the deluge of debt fuelled by low rates does nothing for economic sustainability.
