Tramondo Quarterly (Q3 2021)

In Q2 2021, global equity markets continued on a positive path fueled by solid earnings reports and policy makers’ commitment to keep floodgates open at both monetary and fiscal policy levels.

Overall, inflation is definitely heating up. The only question is whether these price dynamics are transitory – as the central bankers expect – or prove to be permanent.

In its quest to accelerate the return to economic normalcy, the US government has been pushing an aggressive agenda of substantial public spending. The long-awaited USD 6 trillion budget proposal for the fiscal year 2022 was recently unveiled and included quite a few surprises.

After a stellar comeback in late 2020, consumer sentiment has levelled off most recently as the US population appears not to be too confident about the current upswing. The latest data indicate that especially households earning under USD 50,000 annually are concerned about their economic prospects.

Despite the rather supportive fundamentals, new tail risks have emerged during Q2 2021. However, the medium- to long-term investment case for global equities still looks compelling, especially compared to nominal asset classes such as bonds. Thus, we reiterate our positive stance for equities while acknowledging that the road for the remainder of the year might get somewhat steeper and rockier.