Summary

Chris expects a new multi-year economic upswing  predicated on various factors including a strong structural state of the US (global) household & corporate sector

(including high levels of household cash in bank accounts, & recent deleveraging); a mini-cycle upswing driven by the inventory cycle (as outlined at February meeting), supported by housing/investment cycle/& stimulus etc; the 18 year land cycle supporting a strong trend in housing through to 2024/25 – itself supported by commercial banks which have considerable spare capital to put to work; the arrival of effective helicopter money (the co-ordination of fiscal and monetary policy); & the size of the Biden Administration’s fiscal proposals (the current $1.9trillion rescue package plus the proposed infrastructure package later this year), against a backdrop of already large stimulus packages.

Chris commented on the changing landscape for growth and inflation. With bond yields trending higher he advocates increasing exposure to value equities which fare better in this scenario. Growth typically (although not always) fares better with low/falling bond yields. He then highlighted factors impacting inflation; the changing nature/size of fiscal stimulus packages (output gap will soon be gone); a shrinking pool of global workers….(esp China); deglobalisation/supply chain inefficiencies; commodity super cycle; demographics, baby boomers retiring (no longer such a major savings force) – decade of US deleveraging over and the rising importance of Millennials (housebuilding boom); demographics and money velocity; helicopter money is here – likely to stick around (e.g. Democrats pushing for permanent UBI); the strong health of commercial banks’ balance sheets – correlation of core CPI & bank lending.

In terms of Asset Allocation, Longview are overweight risk on a 1 to 2 year timeframe. Specifically, DM and EM equities, Commodities, HY and EM Corporate debt and underweight DM Sovereign debt, Cash and HG Corporate debt.

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