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Changing market environment sees greater opportunities in idiosyncratic growth stocks

David Eiswert
David Eiswert4/28/2022 06:57 PM GMT+08  • 5 min read
Changing market environment sees greater opportunities in idiosyncratic growth stocks
Russia‑Ukraine ‘shock’ creates further complexity / Bloomberg
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Inflation has been peaking globally and is likely to decline into 2023, as many countries are coming to terms with the idea of living with Covid-19. However, the Russia-Ukraine conflict has added further complexity, essentially creating a “shock on top of a shock”. We believe that inflationary shocks have always led to deflation through the subsequent supply response and the slowing of demand. In the changing market environment, we remain committed to focusing on the future, where we see improving economic returns and idiosyncratic investment opportunities that are on the right side of change.

Huge distortions from the pandemic are unwinding

Before Covid-19, it was clear that supply exceeded demand in many parts of the world, with little impulse for strong inflation. The global spread of Covid-19 had a huge impact on demand and supply. On the demand side, the US Federal Reserve took extraordinary measures to stabilise the global economy, lowering the Fed funds rate to 0% and rolling out massive monetary stimulus to support a global economy that would otherwise have faced serious problems. The Fed effectively backstopped risk. Extreme valuations emerged for the most speculative areas, and these are now unwinding. Elsewhere, governments transferred cash to private-sector savings and investment.

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