Aviva Investors said that it expects a “robust” global recovery for the rest of this year and throughout 2022, however it anticipates there will be “growing pains” and growth will slow sequentially.
The global asset management arm of Aviva explained that risks to growth were judged to be balanced mainly based on downside concerns in China and “reopening frictions”.
“Our constructive outlook for growth means that our asset allocation remains broadly pro-risk and we continue to be modestly overweight global equities,” said Michael Grady, head of investment strategy and chief economist at Aviva Investors.
“However, we have scaled back that position marginally because of growing pains which could impact sales and margins.”
Mr Grady noted that Aviva Investors had tilted to a mix of more defensive sector exposures in addition to existing cyclical sectors.
“We also remain modestly underweight duration but have also scaled back that position because of the more balanced distribution of risks regarding global growth. Comparatively tight spreads mean that we continue to see corporate credit as less attractive than equities,” he added.
The global asset manager said that the central banks of most developed markets were not expected to raise policy rates for some time. Upside inflation risks were found to be slightly higher than three months ago but are projected to fall back next year.
“The higher that inflation peaks and the longer it persists, the greater the danger that it becomes more entrenched in the minds of business, households and governments,” Aviva Investors warned.
“If it were to feed more meaningfully into the labour market in the form of higher wage demands, then monetary authorities might have to respond more aggressively.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
