Royal London Asset Management

In the UK, the Budget was at the forefront of domestic financial news last week. The Chancellor had one card up his sleeve: the Office for Budget Responsibility (OBR) now sees less economic ‘scarring’ from the pandemic than previously expected.

Can the UK be at the forefront of the technological revolution required to transition to green? Finance will help but there are no quick fixes and our recent record of harvesting long-term gains from innovation is not great. Let’s hope that our rhetoric is met with action.

The transport sector is a significant contributor to the UK’s carbon footprint. In 2020, transport accounted for almost 30% of total carbon dioxide emissions.

In recent years, social housing has become an increasingly important component of our sustainable funds. However, it is crucial to find the right way to invest in the sector, in a manner which respects the strong social benefits that it provides.

The effective integration of ESG factors in government bond markets is still in its infancy relative to other fixed income markets. A ‘green bond’ market is starting to develop in government bonds, which is likely to become more prevalent.

The recent spike in gas prices has focused attention on how we are to transition to a low carbon economy and who will bear the costs. The money involved is huge and consumers will want sheltering from the impact: so, government, or more correctly, taxpayers will pick up some of the bill.But we also need to look at how we tax.

There is clearly a difference of view about the 1970s. It was the decade of surging oil prices and power cuts, trade union militancy, complacent companies, funny clothes, and stagflation – that intriguing mixture of low growth and high inflation.

Last week saw global government bond yields moving higher across the board. It also felt quite pivotal in exposing the challenges societies face in the new Covid world.

Is economics a science? Many academics in the field would say "yes", and the way that the subject is taught today is based on this viewpoint.

The US S&P 500 Index hit its Covid low in March last year at 2237. Since then, it has more than doubled to stand at its current level of around 4500. For anyone who believes in efficient markets this is a mortal blow. To have one of the most liquid and closely followed markets in the world double in less than 18 months demonstrates that significant opportunities will periodically be presented to investors. Last March we noted this was the third big buying opportunity of our careers (September 2001 and the financial crisis being the other two – note the role of fear and panic). However, we have been surprised at how rapid this ascent has been.

Globalisation is a fact of life for us all – but whether it has been a ‘good’ thing or not depends on who you are. There is a view that globalisation has increased inequality. This is not true on a global scale.

This is turning out to be another strong year for equity markets. Year to date, the MSCI World index in now up 14.7% and the S&P 500 17.2% as of 5/8/2021. Is this justified?

With the recent launch of RLAM’s European Sustainable Credit Fund we now have a range of strategies offering exposure to sustainable credit bonds, including our multi asset funds.

I read with sadness about the death of David Thompson. I did not know him well but, from my perspective as an equity analyst in the 1980s, he stood out as a charismatic Chief Executive of Wolverhampton & Dudley, a regional brewer based in the West Midlands.

The focus in global fixed income markets continues to be on government yields and the question of whether they are telling us something about the future path of growth.

Bond markets are signalling The Great Rotation is over. After falling to 77bps on November 5 2020, the 10-year US treasury yield saw an increase to 177bps on the 31 March 2021.

I have recently got round to reading “1421 The Year China Discovered the World”. It is a fascinating theory that, during the Ming dynasty, the Chinese navy visited America, Antarctica, Greenland and Australia.

I was intrigued by a comment made by James Anderson, the manager of Scottish Mortgage Investment Trust – where he referred to the FTSE100 index being representative of a nineteenth century economy rather than a twenty-first century one.