Switch location / audience type

This content is not available based on your location and audience type.

You currently have access to view the Uk website for Independent Financial Advisers (IFAs).

If this does not apply to you, go back to our homepage.

Select a location
Select an audience type

Let us know who you are so we can optimise your experience.

Please select your audience type

This includes trust companies, fiduciaries, insurance companies, Wealth Advisers and other professionals.

Important information

You are about to enter our website for professionals. If you would like to return to our main website, go back to our homepage.

Please read the terms and conditions before proceeding.

Please note these are subject to change at any time.

The information in this area of the website is aimed at financial advisers, corporate service providers, wealth advisers, and legal and accountancy professionals. It is not intended for direct use by private investors or onward distribution to retail clients or the general public. Please visit our homepage for information and resources for private clients.

The website is for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments.

I confirm that I am one of the categories of professional mentioned above, and that where applicable I am authorised and regulated by the Financial Conduct Authority or equivalent regulated body given my jurisdiction, location, and profession. I have read and understood the legal information and risk warnings.

By clicking the 'Accept' button, you agree to abide by the terms and conditions listed below.

Skip to main content

The start of a synchronised global recovery – seeing is believing

At our latest client zoom update, our experts provided their latest outlook for markets and the economy, with evidence pointing towards a very positive outlook for equity investors; they consider that inflation is unlikely to be a serious problem long term and that we are nowhere near the end of a new economic cycle which has only just begun. Here, we provide their fascinating insights as well as covering some of the other questions asked by our clients – you can watch a full recording of the webinar or read the article below.

Why inflation won’t become a serious problem

Inflation. The biggest topic in the markets right now. And understandably so, with some seeing the brief spike in inflation recently as cause for concern. Why does it matter? It matters because sustained higher inflation tends to lead to higher interest rates which can cause a recession.

But there are several reasons we don’t believe it will become a serious problem for investors – here are just four from our Chief Investment Officer, Michel Perera:

  1. Comparing apples with eggs - comparisons are being drawn with prices this time last year when many areas of the market were affected by the pandemic and we were at the peak of COVID-19 fears – price rises this year were always going to be inevitable as the economy recovered and this is exactly what we’ve seen
  2. Long-term structural changes – certain trends have been keeping a lid on prices for years, including: weak demographics (low population growth), technology-driven productivity improvements, internet shopping and high debt causing low global growth – all of these are unchanged and if anything, getting more disinflationary
  3. Underemployment levels – if this changed, it could have a lasting impact on inflation but as it stands, huge underemployment is keeping a lid on wage growth and unlikely to change for the foreseeable
  4. ‘Don’t fight the Fed’ – it’s one of the best-known adages in markets and it usually pays to heed their words. The US Federal Reserve has repeatedly stated it will not raise interest rates until at least 2023 and will tolerate short-term spikes in inflation.

Of course, short-term spikes in inflation are somewhat inevitable over the next few months as economies recover and consumer demand ramps up, but for the reasons listed above, we think it’s likely to be kept under control.

Why equities can keep on rising

It’s understandable that after a somewhat miraculous recovery (the S&P 500 is up an astonishing 85% from its low in March 2020), investors fear we are on the brink of another collapse. The reality is quite different according to Canaccord Genuity’s Chief Market Strategist, Tony Dwyer, who says we are just at the start of a synchronised global recovery.

Firstly, thanks to massive government spending and fiscal stimulus, the global savings stockpile has been estimated at US$5.4trn – amazing by any standards. Historically, economies only go into a recession without access to money, but with today’s tsunami of liquidity in the global economy, the opposite is true.

Secondly, markets are driven by the direction of earnings – “not by President Biden’s tax plan, not by what’s happening in Russia”, according to Tony. And the direction of earnings and economic activity is driven by the availability of money. US earnings numbers for the first quarter of 2021 beat predictions, they’re expected to rise nearly 30% this year and double-digit again next year. Ultimately, this liquidity is fuelling a global synchronised recovery which has long-term prospects, and “it will take a long time for companies to spend all the money available” says Tony.

While Tony believes there may be bouts of volatility ahead, he sees them as an opportunity for investors to take advantage of.

What questions are our clients asking right now?

Should investors be looking to growth vs. value or cyclical vs. defensive stocks?

Traditionally, investors buy growth shares when there is little global growth because they are willing to pay a premium for growth. When the economy picks up, they buy value shares because they’re cheaper and they hope they will rise faster. For the whole of the 2010s, growth sectors beat value sectors hands down and technology was the star, with the best cashflows and earnings increases anywhere. The pandemic and lockdowns exacerbated this trend.

Now that the economy is reopening, technology (and other growth sectors like healthcare) have been lagging and sectors geared to the reopening of the economy such as energy, materials and industrials, are doing well.

Right now, there is a tug-of-war in markets between investing for the reopening of the economy and investing for long-term secular growth. We see both sides of the argument but the ‘reopening investment’ may dominate until the economy slows down when traditional growth sectors will take over again.

Should investors look at geography or sector?

We used to think in terms of regional and national markets: the UK, Europe, the US, Japan, emerging markets, etc. While this is still partly a valid approach, most of the changes in markets recently have been driven by sectors rather than geography. Technology and healthcare dominated last year. Industrials, energy and financials this year. Last year, the tech strength helped the US market. This year, energy and financials are boosting the UK market and industrials are helping Europe. Today, we focus less on location and more on activity and how the sector is affected by global economic forces.

What about ESG (environmental, social and governance) investments?

Even against a backdrop where smokestack industries are recovering, ultimately some of these businesses will not be favoured by markets for very long as they fail to meet many ESG standards  – now established as a longer-term trend. The green focus of President Biden’s infrastructure programme will act as a further tailwind for ESG investments and the post-COVID-19 employment and healthcare issues will refocus many ESG portfolios.

What do we think about emerging markets?

There have been one or two emerging markets at the very centre of spikes in COVID-19 e.g. Brazil and India, which has affected sentiment and economic activity. Despite coping well with COVID-19, China has also taken a fall as it aggressively increases regulation in the tech space (Alibaba was fined recently). Despite these factors, we continue to like Asian emerging markets where growth is linked with China.

Is the sheer volume of money in the global economy responsible for the sharp uplift in bitcoin?

Yes, we think so and since investors are unable to value the cryptocurrency properly, we feel investing in bitcoin is just speculation at this stage. You can read more about our thoughts on investing in bitcoin here. We are, however interested in the infrastructure around it, for example companies employing blockchain, and these opportunities can be played more via an ESG lens.

Will inflation be more of a problem for the UK than the rest of the world?

The UK has developed a poor reputation with inflation but we don’t think it will become a UK problem specifically. First, Brexit did cause some bottlenecks, pushing up distribution prices – log jams in ports etc. but those problems are going away. Secondly, having been weak for ages, sterling has actually started to appreciate with some signs of economic uplift. The Bank of England has also said it’s going to be very tolerant of inflation spikes so we don’t see it as long-term problem for the UK.

What about currency?

The US dollar is often seen as the key currency and often favoured when the global economic outlook is poor. However, as we believe we’re at the start of a synchronised global recovery, we expect more interest in developing over developed currencies. 

At our latest webinar, our experts, Michel Perera and Tony Dwyer, provided an eye-opening and engaging update on the current outlook for markets. Although there may be blips along the way, their unequivocal view in light of relatively controlled inflation, the start of an ESG super-trend and extremely positive US earnings figures, was that investors should use any pullback in the markets to put their money to work.

Speak to one of our experts

If you have any questions about the current environment or about your investments, please get in touch with us or email questions@canaccord.com

Please remember, if you hold an account with Canaccord, you can check your portfolio value at any time, through Wealth Online or by getting in touch with your Investment Manager.  

Find this useful? Read more here:

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.

This is not a recommendation to invest or disinvest in any of the themes or sectors mentioned. They are included for illustrative purposes only.

The information contained herein is based on materials and sources deemed to be reliable; however, Canaccord Genuity Wealth Management makes no representation or warranty, either express or implied, to the accuracy, completeness or reliability of this information. All stated opinions and estimates in this document are subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information.

Photo of David Esfandi

David Esfandi

Chief Executive Officer

David Esfandi was appointed CEO of Canaccord Genuity Wealth Management Limited in March 2014. He was previously Managing Director of Ashcourt Rowan Asset Management, where he played a key role in restructuring the business and acquired a leading private client team from a large European bank. Prior to that, he spent 10 years with Deutsche Bank, latterly as Director of Proprietary Pan European Equity Investment. He also played a key role in starting the Private Institutional Client business. Mr. Esfandi began his career at Goldman Sachs International as a financial analyst. He holds an MA in PPE from Oxford University.


Investment involves risk and you may not get back what you invest. It’s not suitable for everyone.

Investment involves risk and is not suitable for everyone.