The past 18 months have seen huge swings in economies, markets, how businesses operate and changing risks. As eventful and risky as this period has been it has been a very good period for the wealthy; asset owners have benefitted from rising house prices and soaring stock markets, and with access to leverage also lower borrowing rates. It has also been a period of uncertainty, unrest and geopolitical risks, along with a global widening of the wealth gap between countries and within countries.

Despite the risks, both bonds and equities have performed very well. While Rezco avoided the initial covid crash, the risks have kept us largely out of the market. These risks have changed from the initial uncertainty around the disease, to the risk of high valuations as equities, pushed higher by plentiful liquidity, ran ahead of the reality on the ground. Covid’s second wave risks kept us out of the market towards the end of 2020, but equities managed to rally through this as the second wave globally was much less severe than potential (the beta variant occurred in an economically insignificant country and the delta variant arrived late enough for the developed world to be largely vaccinated; this line of events was not at all guaranteed). As the calendar turned over to 2021 high valuations and inflation risk has kept us risk averse. One has to ask the questions: Why not just pile into equities given all the liquidity? Why go for such a long period without taking a lot of risk? If the reasons keep changing, are you simply backward looking?

Read the full article here: Q2 2021 Newsletter