Tactical Investment Strategy, July 2021

July 15, 2021 — The post-pandemic recovery will continue to be the driving force for sentiment and returns in the back half of 2021. We expect an above-trend and broadening global growth picture to push risk assets higher, keep spreads stable, and apply upward pressure on rates in the coming months. Central bank policy, particularly the Fed’s taper timeline, will be a source of uncertainty and volatility, but we do not expect it to derail the recovery. Assuming Fed tapering starts in late 2021 and it takes roughly eight meetings for the Fed to scale down entirely, this implies another trillion dollars’ worth of purchases or liquidity into markets over the next 12 months – which is highly supportive to spreads and risk assets.