Increase in global spending the path to sustainable growth

Notwithstanding the recent pullback, equities have rebounded sharply from their lows in March, with economic data indicating a moderation in the pace of GDP decline, while sentiment towards risk assets has improved considerably.

This increase in risk appetite has in part been fuelled by investors becoming more optimistic (or perhaps less pessimistic) on the outlook for financials. However, while it is true to say the world’s financial system no longer seems to be in an absolutely critical state, it does remain fragile and susceptible to further ‘fat tail’ events and write-downs in capital. That said, at a broad level, we do see upside for both equities and corporate bonds in the medium to longer term. Stocks remain undervalued relative to history and other assets, with uncertainty over the economic outlook suffi...