Investment update for October 2021
We remain confident about the economic recovery, but there are increasing risks of a temporary weakening and a market correction. We're slightly more cautious about shares in the short term.
In a nutshell
The economies of the US and Europe are continuing to recover and company earnings are soaring, partly because Covid-19 is having less and less impact on economic activity thanks to vaccinations.
However, the pace at which the economy is recovering may slow in the short term due to:
- temporarily higher inflation following the restart of economic life
- longer delivery periods that could have an adverse impact
- recently skyrocketing energy prices
Consequently, we are giving shares a neutral weighting in the portfolio.
We are focussing mainly on the shares of companies in the euro area. Because of the issues in China (Evergrande), we're very cautious about shares from Asian emerging markets.
Vaccinations protect
Covid infections are on the rise again in Europe. Thanks to the great strides already made in the vaccination programmes, the number of hospital admissions and acute cases remain manageable. New strict lockdown measures do not seem to be on the cards.
In Asia and the US, by contrast, we are seeing a sizeable decline in infections. Vaccinations are surging ahead especially in Asia, making restrictions on economic life less and less necessary.
Somewhat slower growth rate in the short term
Lots of savings that had been hoarded by consumers, low interest rates and a generous budgetary policy are ensuring that the return to normality stays on track. Nevertheless, the rate of growth could lose some steam in the short term.
Reopening has peaked in most regions. Temporarily higher inflation figures are weighing on growth. They are the result of higher energy prices and bottlenecks in the carriage of goods that are causing extended delivery times.
In China, the recent problems in the real estate sector represent a challenge to growth.
Temporary breather for the stock markets
The strong economic recovery and spectacular rebound in corporate earnings propelled stock markets to new records. We remain confident about the economy, but are working on the assumption that the slowdown in growth could temporarily weigh on market sentiment.
With interest rates being very low, there is no real alternative to shares (TINA), but we have now become slightly more cautious.
We continue to favour sectors that benefit from higher interest rates (banks and insurance companies). At regional level, we prefer Western markets and are steering clear of Asia.
Besides this long-term vision, protection and trends on the financial markets are important aspects too. Your personal investment, which you can see in KBC Mobile and KBC Touch, may have a different composition that takes account of your comfort zone.