Investors are experiencing a huge upswing in economic optimism as coronavirus vaccine roll-outs get underway across the world.
According a monthly survey from Bank of America, 86 per cent of fund managers expect higher inflation in the next 12 months.
After spending a year piling into safe-haven assets like government bonds, investors are now cutting allocations toward fixed income. The sell-off has caused yields to surge, and prices to fall as investors bet on a sunnier economic landscape in the coming months.
Not everyone agrees that the road out of the pandemic will run smooth. In the US, Fed chair Jerome Powell has warned that economic recovery is “far from complete”.
“Wildly uneven and unfair” is how United Nations secretary general António Guterres characterises the global vaccination effort. Three quarters of all vaccinations have so far been administered by just 10 rich countries, while 130 countries have not yet received a single dose.
A coalition of institutional investors including Aviva Investors, AXA Investment Managers, and Fidelity International, is warning that damage to the global economy could top USD9 trillion if governments fail to ensure that developing economies gain access to Covid-19 vaccines.
UK-listed firms’ total dividends almost halved last year as its market-dominating financials sector paused pay-outs. A sign of recovery came this week as Lloyds, HSBC, and Barclays announced they were resuming dividends as the earnings season began.
The UK economy is expected to be kept on life support for the foreseeable future, with next week’s budget speech likely to announce extensions to the furlough scheme and a business rates holiday for retail, hospitality and leisure until the national lockdown ends in June.
Editor, Institutional Asset Manager