A somewhat slower ‘return to normality’ 09-11-2021

Vaccines keeping Covid in check

Covid infections are on the rise again in Europe. Thanks to the great strides already made in the vaccination programmes, the number of hospital admissions and acute cases remain manageable. New strict lockdown measures do not seem to be on the cards.

In Asia and the US, by contrast, we are seeing a sizeable decline in infections. Vaccinations are surging ahead especially in Asia, making restrictions on economic life less and less necessary.

Growth past its peak

Lots of savings that had been hoarded by consumers, low interest rates and a generous budgetary policy are ensuring that the return to normality stays on track. Nevertheless, growth could lose some steam in the short term.

Reopening has peaked in most regions. Temporarily higher inflation figures are weighing on growth. They are the result of higher energy prices and bottlenecks in the carriage of goods that are causing extended delivery times.

In China, the problems in the real estate sector represent a challenge to growth.

Stock markets factoring in a great deal of good news

The Federal Reserve is tapering bond buying, which is pushing up interest rates in the US. In the euro area, such an adjustment does not seem likely. Interest rates remain low and, therefore, cash and bonds are not a genuine alternative to shares.

Nevertheless, we have become slightly more cautious. The spectacular rebound in company earnings propelled the stock markets to new records. We remain confident about the economy, but are working on the assumption that the slowdown in growth could temporarily weigh on market sentiment.

We continue to favour sectors that benefit from higher interest rates (banks and insurance companies). At regional level, we prefer Western markets and are steering clear of Asia.

Besides this long-term vision, protection and trends on the financial markets are important aspects too. Your personal investment, which you can see in KBC Mobile and KBC Touch, may have a different composition that takes account of your comfort zone.

Dirk Thiels, Investment Strategist KBC Asset Management
'The recovery in growth and earnings has passed its peak. There are increasing risks of a temporary weakening and a market correction. We're slightly more cautious about shares in the short term.'

Editing ended on 09 November 2021. This document is a publication of KBC Asset Management NV (KBC AM). The information in it can be changed without notice and offers no guarantee for the future. Nothing in this document may be reproduced without the prior, express, written consent of KBC AM. This information is governed by the laws of Belgium and is subject to the exclusive jurisdiction of its courts.