Taper tantrum not in the cards
A strident taper tantrum similar to the one experienced in 2013 is not anticipated despite the US Federal Reserve looking to taper asset purchases before any subsequent interest rate hikes, according to American Century Investments.
The fund manager’s latest investment outlook said markets might react to the tapering with short-term volatility but a taper tantrum was not anticipated.
American Century said it expected higher inflation and yield expectations to weigh on corporate earnings growth without making specific calls on inflation or interest rates.
“The effects of higher raw materials and labour costs on general operating expenses could also dampen earnings. In this environment, we continue to look for companies with the pricing power to sustain earnings growth,” it said.
The fund manager said as developed markets growth moderated and the COVID-19 recovery broadened, emerging markets had more room for relative growth fuelled by vaccine-related optimism.
“Northern Asia performed well during early stages of the pandemic, aided by the concentration of technology, internet and e-commerce stocks. Stay-at-home orders, mobility restrictions and lockdowns supported growth in these industries,” the outlook said.
“We expect this trend to continue throughout the remainder of the year, given that many of these economies remain below pre-pandemic growth levels.”
It noted many IT and communication service stocks were volatile in the first half of 2021 as markets rotated away from pandemic beneficiaries to more cyclical firms.
“We continue to see a long runway for existing trends, including digitalisation, cloud-based computing and e-commerce,” American Century said.
“In our view, companies well-positioned to deliver on these secular trends remain attractive and should continue to support emerging markets.”
Recommended for you
Having officially opened its doors, ETF Shares – led by three former Global X employees – has now launched its first three ETF vehicles on Cboe Australia for financial advisers.
Platinum Asset Management has lost a near-$1 billion institutional mandate as data shows its funds under management fell below $10 billion in April.
Betashares and Global X have announced they will both be launching new products focused on defined income bonds and Chinese technology, respectively.
Sydney investment manager Vado Private has welcomed a new director and head of funds management to its team as it seeks to grow its presence in the Australian private credit market.
