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In this discussion, we were joined by Lord Mark Sedwill, delving into the potential geopolitical flashpoints on the horizon; Russia-Ukraine, China's consolidation of power in Taiwan, upcoming elections on both sides of the Atlantic and, of course, inflation.

The final quarter ended on a high note for global stocks, rounding off a strong year in spite of the continued impact of Covid-19, supply and labour imbalances, and inflationary concerns. In the first podcast of 2022, we take a look back over the final months of the year, as well as the year as a whole, considering how markets have performed, and how this environment has impacted portfolios.

The third quarter of 2021 proved a more challenging one for markets following the strength of Q2. As growth has begun to slow, inflationary struggles have persisted alongside the lingering impact of the pandemic. Delving into these themes, as well as various geopolitical developments and current issues in labour markets, we also provide an overview of portfolio performance in the context of this tough quarter and take a closer look at the impact of inflation in particular.

In our recent Autumn Investment Briefing, we took a look at what the transition towards a post-pandemic world will look like, discussing the uncertainties and questions that remain around the macroeconomic landscape, rising inflation pressure, market valuations, and what all this means for portfolios. 

In our latest 'In conversation with' series, we had the pleasure of speaking with Lord Sedwill. The conversation was wide-ranging, covering both domestic and global issues, as well as touching on his role at the recent G7 Summit in Cornwall where he chaired a panel on economic recovery.

While the second quarter of 2021 saw a continuation of many of the first quarter trends; strong global GDP growth, slowing contagion rates and ongoing vaccination roll outs, we are finally seeing a rise in inflationary pressure. The extent of this inflation, and impact on businesses, stocks and bonds, still remains to be seen, but will likely depend on supply-side dynamics and ongoing policy decisions. Portfolio performance has continued its strong run from the last quarter, owing to some surprise overperformers, and businesses recovering more of their pre-pandemic returns. Despite the anomalies of the current market landscape we are optimistic about the coming months, given the likely continued release of demand, and the potential opportunities that a post-Brexit UK could present. 

The first three months of the year have seen the continued recovery of national economies and markets, with much of the world now at more-or-less pre-crisis levels of GDP. While bonds have fared less well in recent months, and there are still lingering uncertainties around inflation and diverging recovery rates, we believe that fiscal policy will help mediate this inflationary risk, and that growth statistics do not tell the whole story about the current or future trajectory of different nations. The favourable stock market landscape has made for a strong quarter for our portfolios, bolstered by the continued rotation away from ‘growth’ to ‘value’ stocks and a better-than-expected performance by our diversifying assets, which usually drag in a period of rising equity markets. 

As global markets and economies begin to recover, and look forward to a post-pandemic surge in demand, there have been increasing concerns about a subsequent rise in inflation. Taking a look at dramatic periods of high inflation like the 1970s, as well as how low inflation can erode wealth and undermine returns over time, we delve into what inflation is, its risks, and what we do to try and protect portfolios in the event of an increase.

With a drop in consumer spending and a halt in international travel, payments companies were naturally impacted during 2020. And yet, at the same time, the past year has seen a huge shift from cash to digital payments, as consumers look for more hygienic methods of paying.

Taking a closer look at these trends, we take a deep-dive into Mastercard and American Express, the two payments companies held in portfolios.

The fourth quarter marked a strong end to a turbulent year, shoring up the remarkable market recovery in the latter half of 2020. Market performance was boosted by the rolling out of vaccinations alongside supportive policy, continued economic recovery and encouraging geopolitical developments. This supported our view that markets tend to ‘look across the valley’, especially in what was primarily a public health crisis, rather than an economic or financial one. An equally impressive quarter for portfolios was bolstered by the rotation towards ‘value’ stocks and several key investment decisions made during the last few months.