FNArena’s Weekly Insights – November 15 2021

In this week’s Weekly Insights:

-Managing Risk In Earnings
-All-Weather Model Portfolio
-Conviction Calls
-Research To Download

By Rudi Filapek-Vandyck, Editor FNArena

Managing Risk In Earnings

If you thought global supply chain bottlenecks remain on investors’ radar because the outlook for inflation depends on it, you’d be half correct.

One of the market narratives that has grown in popularity recently is that many of those bottlenecks are finding relief, which not only means inflation pressures should start to subside, but bond markets will have to retreat from their uber-aggressive pricing of central bank rate hikes, which can only be good news for share markets.

Relief through bottlenecks also means corporate margins might not come as much under pressure as feared, so that makes for a double positive.

Enter the strong rally we have been witnessing in US equities since late September (apparently also supported through short-covering by those who had positioned themselves for a bigger fall previously).

The upshot is most experts and commentators have seemingly resigned in the fact this bull market continues to showcase its ability to surprise positively.

On my observation, most on the cautious side of the market who have been preparing for a much greater fall for equities are now prepared to accept any share market correction might not arrive until next year.

Regardless, those experts say, headwinds are building on the back of ongoing severe energy shortages across Europe, repeated set-backs in adjustments to life with covid, decelerating growth in China, and ongoing inflation challenges in the US (eating into household spending).

As the end-of-year holidays are just around the corner, many companies will likely still be struggling to get products on the shelves, meaning consumers are faced with limited supply and higher prices.

And so, it seems, the calendar year of 2021 will come to an end while holding a basket of numerous contradictory narratives, and with markets showing a penchant for positive surprise.

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