Covid-19 slowing economic recovery in Japan, but catch-up is underway

Underperformance due to surge in cases

As we look ahead to the autumn, volatility looms for global markets given elevated stock valuations, moderating economic momentum and the prospect of liquidity tapering on the horizon.

While investors should brace for bouts of turbulence, the global economic recovery is broadening as vaccination programmes progress, particularly in regions that had previously lagged. We have taken some equity risk off the table, but we expect cyclical sectors and regions of the market to lead the gains and benefit the most from the reopening trade: including value, small caps, Japan and emerging market equities. Although the recovery trade has not been working over the last six to eight weeks, we think the pullback is temporary and we hold the positions as the global economy works thro...