The idea of growth narratives getting a bit ahead of themselves (and running smack into Delta) are evident in the evolution of the shape and slope of sovereign bond yield curves (w/ data from 6m ago firmly above data from today). Still, a lot better than this time a year ago.
In our view, growth will likely remain robust. The pathway to “vaccinated status” remains clear, demand side incentives are well established via “vaccine passports”, and pent up savings remains considerable (and desired consumption strong).
We suspect issues like tapering, and the eventual hiking of rates are more of a challenge for the market, and for long duration growth stocks, than it is for economic growth.
How do we reflect that in our portfolios? Well, robust growth is a valid reason to deploy capital inline with an SAA. Challenges to valuation are a valid reason to tilt underweight on a DAA basis.
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