Equities should continue to perform well with a few positive tailwinds - sentiment related to economic reopening and recovery, reinvigorated buyback schemes, and some release of excess savings that households have built up. But bear in mind that we are likely past the peak of earnings growth - the bounce back in activity after Covid restrictions were eased and flattering base effects from lockdowns are fading.
As we approach the fourth quarter and slower earnings growth, the positive environment may become delicate as potential headwinds come into better focus. The blissful market sentiment and stretched valuations could capture attention. How the Fed executes its bond tapering programme, which could be announced this month, and the farcical US debt ceiling drama, which could start playing out from October, could jolt markets. US corporate taxes are also expected to lift next year.
Investors seeking ‘safe havens’ may struggle, but there are some bargains available. We do not subscribe to the idea that China has suffered a structural or persistent de-rating after being sold off this year following regulatory action. Its long-term outlook is still positive driven by some exceptional businesses and fundamentals, with some terrific value emerging. The UK is still cheap, but its fundamentals are stronger than they have been for the past five years now there is more certainty on Brexit. Finally, despite the ongoing effort to contain Covid in Japan, its economic and business investment data are pointing up. Learn more on : Equities Outlook September 2021 - Still positive, but past peak recovery (fidelity.be)
