Themes.

Updated quarterly, our evolving views on the thematics shaping the markets around us

Summary

GOVERNMENT DEBT | We’re now firmly in the phase of the global debt super-cycle where we’re realizing diminishing marginal returns (i.e. GDP growth) on debt (and likewise, on deficit spending). This does not, however, mean that governments are slowing down issuance – global debt has grown from 83% in 2019 to 100% in 2020 and it will continue to head in one direction, higher, at the expense of future generations.

STIMULUS | We continue to move towards more centrally planned economies as governments’ monetary and fiscal support (+$10 trillion in 2020 globally) becomes the most important driver of asset prices around the world and the lifeline of both the economy and financial markets.

INFLATION | Outsized fiscal deficit spending is strengthening the case for higher inflation, but we’re unlikely to see it go higher than 2% in the short term as the deflationary forces (technology, globalization, lower population growth) that have been in place for the last 40 years continue to quietly shape the economic narrative.

EQUITY MARKETS | Price discovery has been rendered nearly obsolete as valuations are now primarily driven by stimulus and passive flows (85% of every new retirement dollar goes to indexing and target-date funds). This will continue to make large companies larger, rewarding momentum at the expense of value, and US big tech at the expense of everything else.

GOLD & BITCOIN | 2020 was a fantastic year for gold and bitcoin, and will likely continue to be the case into 2021 as investors and governments weigh the effects of broad-based fiat debasement, as well as the re-nationalizing efforts of many G20 countries, drive global sovereigns to seek alternative stores of value, away from US Dollar-denominated assets.

COMMODITIES | 2021 might be the year where a structural bull market in commodities begins on the back of years of underinvestment, fears about inflation, and a lower USD.