ricky2tricky4city
Steffen Freund
I think it's a really difficult picture at the moment to know what is priced in.
If you take the ongoing war and covid out of it, the financials and corporate debt (or leverage) of many companies was way overstretched. Tech was the growth sector, but still largely waiting for 'profits tomorrow'.
Then you have the personal debt problem (that's always there), ironically helped by Covid as we were given free cash but with restricted opportunity to spend it. I'm sure the massive rise in living costs will chomp away at it nicely.
Then there's government debt. Justifiably piled up fighting one crisis or another but not in a pretty state coming into those crises in the first place.
Inflation can help anyone in debt, but the detachment for people on the other side ie savers is stark. Scratch around for 1-2% on your savings compared to inflation running, I'd estimate easily at 7-8% at the moment. You'd be happy (relieved) to achieve that tracking an index these days.
And the short sharp inflation shock I wouldn't be surprised doesn't turn out that short (5yrs?). The lower income suffer most, as they're not looking for return, just to make ends meet. Plus it's the unavoidable costs that are spiking.
Boring stocks like utilities are probably safest at the moment. (National grid etc). There are probably some good cyclical stocks that might bounce back (from lows during covid) but generally give them a swerve with incomes stretched. A correction in tech might be a buying opportunity, it's the future after all, very few unicorns that won't be tech companies.
Commodities are interesting as event induced supply and demand issues ensue. (And geopolitical). Plus GHod knows how much rebuilding might be required.
If you take the ongoing war and covid out of it, the financials and corporate debt (or leverage) of many companies was way overstretched. Tech was the growth sector, but still largely waiting for 'profits tomorrow'.
Then you have the personal debt problem (that's always there), ironically helped by Covid as we were given free cash but with restricted opportunity to spend it. I'm sure the massive rise in living costs will chomp away at it nicely.
Then there's government debt. Justifiably piled up fighting one crisis or another but not in a pretty state coming into those crises in the first place.
Inflation can help anyone in debt, but the detachment for people on the other side ie savers is stark. Scratch around for 1-2% on your savings compared to inflation running, I'd estimate easily at 7-8% at the moment. You'd be happy (relieved) to achieve that tracking an index these days.
And the short sharp inflation shock I wouldn't be surprised doesn't turn out that short (5yrs?). The lower income suffer most, as they're not looking for return, just to make ends meet. Plus it's the unavoidable costs that are spiking.
Boring stocks like utilities are probably safest at the moment. (National grid etc). There are probably some good cyclical stocks that might bounce back (from lows during covid) but generally give them a swerve with incomes stretched. A correction in tech might be a buying opportunity, it's the future after all, very few unicorns that won't be tech companies.
Commodities are interesting as event induced supply and demand issues ensue. (And geopolitical). Plus GHod knows how much rebuilding might be required.
