Independent Strategy

On fire, but not yet burnt

Covid policy prescriptions have certainly held equity markets up. But that doesn’t necessarily mean the valuations the market has placed on the Covid winners are correct. Indeed, as economies normalise it’s likely to prove challenging to maintain the growth rates in the areas of the market that these heady prices depend upon. ‘Zoom fatigue’ could quickly spread. Outside the frothy segments, valuations might look reasonable. But the fundamental damage inflicted by the pandemic should ultimately weigh too. Those pressures include rising inflation expectations and longer-term interest rates, the normalisation of policy (fiscal and monetary) and the legacy issues of Covid.

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