Commentary | December 2021
Commentary | December 2021

End of Year 2

And so ends year 2 of the Covid crisis. The last 12 months have seen new variants, lock-downs, curfews, as well as disrupted international trade…. The worldwide vaccination campaign has not quite brought back a return to past normality but it has certainly helped to move in this direction.

In the finance universe, this year saw rising long term US interest rates. The price of ‘risk assets’, notably equity and real estate, continued to rise substantially. Inflation pushed up the cost of living in rent, food and day-today living items. Needless to remind our readers, the continuing accommodative monetary policy has kept markets away from any disorderly outcome in 2021. 

The ‘visible heavy hand’

Over the last 2 years, the very ‘visible heavy hand’ of Government and Central Banks to address the sanitary crisis has had its lot of unintended consequences. Amongst finance leaders, the debate has progressively moved to try to resolve some of the more negative aspects of past interventions, in particular inflation.

Open capital flows, international trade, highly productive technology advances, ‘just in time’ distribution systems, historic quantities of outstanding private and public debt, monetary policy experimentations, demographics, changing geopolitical hegemony to name but a few, all point to an interconnected complex world economic system. With this backdrop, the room to maneuver for financial authorities is in reality constrained. Any action can have unforeseen short-term reactions, unintended long-term consequences and sometimes both. Since the last tightening policy cycle, the Federal Reserve is even more aware of this, hence a constant revisiting of their narrative together with a proposed progressive roll out of any policy change in 2022 so as to avoid destabilizing markets too much.

ASG Capital defensive approach

Our defensive approach implemented from mid 2021 places us in a strong position to move to an aggressive stance in 2022 as a reduced accommodation policy brings with it higher interest returns for bonds. In meantime, our assets continue to generate an interest revenue stream above 5% on average.

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