Philosophy
Understanding the Investment Framework
Importance of the Global Capital Flow
Money moves Markets! Strong economies rarely have strong markets. Such experience debunks popular economic thinking which suggests profits expand pro-cyclically with the economy and assumes more profits are always good for equities.
Academic studies including from London Business School (LBS) and MSCI find that economic growth and stock market outperformance are in practice negatively correlated.
Why does Asset Allocation Matter?
Positive Correlation
According to a Vanguard study, 88% of investor returns are tied to asset allocation i.e., there is positive correlation between assets in the same class, meaning they typically move in the same direction.
Favouring Risk Assets
Low inflation favours risk assets, as seen over past decade; post GFC, money went to growth in search of returns.
The Future
But, like it is said ‘Past performance is not an indicator of future’, what happens when low inflation was thing of past and world faces a permanent wave of persistent inflation?
