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Investment Strategies For A Global Revival

Feature Stories | Apr 23 2021

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As several economies regain pre-covid levels of activity and the world transitions to stimulus from support, this time may be different due to a more enlightened attitude towards fiscal and monetary policy.

-A globally coordinated economic upswing in 2021
-Equity preferences by sector, style and individual stocks
-Technology/Innovation investment opportunities

By Mark Woodruff.    

A revival is essentially already underway on a global basis. World GDP has grown each quarter since the middle of 2020 and several economies will regain pre-covid levels of activity this year, including the US, while others should pass that mark early in 2022.

In the US, the federal government is providing a boost to economic growth via the passage of a $1.9 trillion support package to stimulate the economy and further plans for a huge infrastructure package. 

Elsewhere, government support in the UK, the EU, Japan and China is also significant and will likely persist into the expansion phase in an attempt to avoid the austerity measures implemented in the wake of the GFC.

Simultaneously, central banks have made it clear that they won’t be raining on the cyclical recovery parade, given their commitment to achieve, or even temporarily overshoot, inflation targets. They now have a wider agenda which includes engineering employment gains that permeate through all parts of society.

This pro-cyclical shift of both fiscal and monetary policy has implications for the interplay between asset classes.

Before looking at how portfolio managers worldwide are adjusting their asset class exposures, let’s first examine expectations for world growth and inflation.

Global growth

The manufacturing sector has rebounded rapidly and has continued to steadily expand through the more recent lockdowns. As a result, industrial production is already nearly back to pre-pandemic levels in many major economies. Also, spending on retail goods is well ahead of pre-pandemic levels in countries such as the US, where income support has been greatest.

Previously, Aviva Investors had an above consensus growth outlook for the world economy. In its latest assessment, the level of global activity at the end of the first quarter 2021 is roughly in-line with those prior expectations as weakness in Europe is offset by strength in the US and China. 

As the investment manager looks further into 2021 and 2022, a somewhat faster pace of recovery is expected than previously. It’s now forecast that global activity will reach the pre-covid trend by the end of 2021 and growth will be around 7% in 2021 and 4.5% in 2022, with risks to the upside. 

The key to delivering this rapid pace of recovery is both the success of vaccine roll-out and subsequent reopening of economies, alongside continued fiscal and monetary support.

Global inflation 

Morgan Stanley sees inflation only modestly overshooting key central bank target levels. Also, rising inflation and interest rates are considered normal at this point in the economic cycle. Nonetheless, there is caution against a disorderly or rapid increase in interest rates caused by an inflation shock. 

The output gap is an economic measure of the difference between the actual output of an economy and its potential output. A negative gap means that there is spare capacity, or slack, in the economy due to weak demand.

While spare capacity remains in most economies, underlying inflationary pressures are expected to be muted. However, Aviva Investors expects spare capacity to be eliminated much more quickly than in the recovery from the global financial crisis of 2008. 

In the US it’s expected the output gap will turn positive by the end of 2021, with the eurozone to follow around a year later. That could put upward pressure on underlying inflation in 2022 and beyond, something that the investment manager thinks would be welcomed by central banks, so long as it is not excessive.

Thus, even with an economic recovery and upward pressure on inflation, Aviva expects monetary and fiscal policy to remain supportive. Central banks are expected to delay any tightening in policy until inflation has moved above 2% for a period. And looking beyond the pandemic, many governments are planning to increase spending on public infrastructure, as well as in other areas, to stimulate future growth.

Is it different this time?

The nature of the covid crisis has had a seismic effect on the way politicians and policymakers see their role in society, explains Aviva. The Washington Consensus that emerged in the 1990s has largely given way to highly interventionist demand management policies that have the potential to persist far beyond the crisis itself. If that turns out to be the case, then this time really is different.

The need for much of the direct fiscal support should diminish automatically. However, countries are using the covid reset, alongside the more enlightened attitudes towards fiscal policy, to rewrite the policy agenda. The US, for example, after passing the recent stimulus program, is quickly refocusing on a potentially huge and ambitious public spending package.

Everywhere traditional parameters and targets of fiscal policy are changing. In general, we seem to be evolving from support to stimulus. Some moves are reasonably conventional though overlooked for several decades. Infrastructure expenditure is an example, but even here there are important changes such as increased emphasis on the green agenda and the digital revolution.

However, some fiscal policy has an entirely new slant, notes Aviva. Countries are adopting or considering fiscal initiatives in new arenas, reflecting novel societal objectives in areas such as climate, diversity and inequality. 

In general, fiscal tools seem to be reasserting themselves as key policy weapons, having been stuck in the doldrums for several decades.

Financial markets are starting to query the exact timing of an exit from the current extreme stimulus policy stance though have largely accepted that there will be minimal changes in the short run. The timing (and eventual degree) of any decisions that are made in coming years will also be fundamentally influenced by the adoption of a new monetary policy regime in many key geographies.

The Federal Reserve in the US has been at the forefront of these changes, unambiguously adopting an average inflation targeting (AIT) policy. Essentially, this will allow the Fed to balance inflation undershoots with intentional inflation overshoots. Other central banks have not yet been as bold, but are clearly moving in a similar direction.

This represents a major transformation in the way in which monetary policy is conducted, points out Aviva. It is perhaps the most important change since inflation targeting became the norm in the 1990s. While not yet certain, it could change the inflation and policy landscape fundamentally.

Equity allocations across styles and sectors

Given the above growth outlook, Aviva Investors prefers to be overweight global equities. There is a further leaning towards the both the US and UK markets, where domestic growth differentials, strong policy support and strengthening global trade should be supportive. 

The most positive environment for equities, characterised by rising breakeven yields but falling real yields, is arguably behind us. Equity returns should slow from here but remain positive as real rate pressures on valuations are balanced by a bright outlook for earnings.

Having correctly predicted three months ago that value and cyclical stocks would outperform high-growth stocks, the asset manager expects that trend to continue. Steeper yield curves, in combination with a positive cyclical outlook, also leads to the maintenance of cyclical equity exposure to the Energy and Industrials sectors.

Brandywine Global are in full agreement with Aviva regarding value stocks. The US-based investment manager points out that while there has been a rally in recent months, the relative multiples of value stocks are still near all-time lows.

Higher interest rates are expected to help sectors with large exposure to value, like Financials, and hurt the high-flying momentum stocks where multiples have gone to extremes. There is also some evidence that “value” is becoming the “momentum” trade as well, which creates a powerful combination. Bank stocks, in particular, do well historically when short rates are stable and longer rates are rising.

Active management is as crucial as ever given many of the fastest growing/highest multiple stocks may be more challenged than in the recent past. According to Franklin Templeton, these companies now need to deliver on the promises implied by their rich valuations, and many simply won’t.

Despite this, there are still opportunities across many high-growth companies and the global investment firm believes the discounted cash flow methodology is the best way to determine a company’s intrinsic value, as it differs from standard multiples that do not incorporate growth.

Morgan Stanley reminds us that the Equity Risk Premium is at a decade low which, along with record high multiples, means the key driver for equity market returns from here will be corporate profits.

The investment bank believes sectors that should benefit from higher economic growth, inflation and interest rates are Materials, Financials and cyclical technologies like semiconductors and industrials. This rotation comes at the expense of interest-rate sensitive equities like those in defensive sectors (utilities and infrastructure) and large-cap secular growth names.

Looking even further out, while simultaneously calling upon the lessons of history, MFS expects that as policy normalises, investors will pivot back to cross-cycle earnings-compounders that make up many a portfolios’ core holdings. Cyclicals will have had their day, as they often do in the early phases of a market cycle and secular trends will win out in the long run, explains the American investment bank. This will reward patient investors as the cycle matures.

United States

There has been stronger-than-anticipated activity during the fourth quarter 2020 and the start of 2021. In addition, the US has had a rapid vaccine roll-out and the passage of another very large fiscal support package. Consequently, Aviva Investors revises up growth expectations for 2021 to 6.5%, with risks tilted to the upside. This is with the conservative assumption that only around 15% of household excess savings are drawn down in 2021, with the possibility this could be materially higher. 

The investment manager also revises the inflation outlook modestly higher, reflecting a more rapid elimination of spare capacity and a more positive outlook for the housing market. Despite these changes, it’s not expected the Federal Reserve will raise interest rates before 2023.


The Australian economy continues to be supported by high excess household savings which has supported consumption. Morgan Stanley estimates Australian households have around $200bn in excess saving which is equivalent to around 10% of Australia’s GDP. This has also been helped by a very strong labour market recovery, with employment returning to pre-covid levels in February 2021. 

Housing related activities (construction and sales) remains bifurcated with detached houses leading activity. Apartment activity, on the other hand, continues to suffer from closed borders, which limits overseas student and tourist arrivals.

Policymakers remain growth-focused, with more government stimulus expected in the May Budget, and the Reserve Bank of Australia (RBA) committed to keeping interest rates at current low levels for several years.

Over the March quarter, Morgan Stanley has increased the allocation to growth assets based on expectations of higher equity markets in a year’s time. Specifically, the investment bank continued a preference for International Equities over Australian Equities on expected stronger cyclical upside and better relative policy support. 

Within the International Equity allocation the overall hedged position was increased and a preference was expressed towards Japan and also to the Value style. Within the Australian Equity allocation the lean towards Value was maintained via Resources and a tilt toward Financials was introduced.

Westpac Bank expects the Australian economy to expand by a well-above-trend 4.5% in 2021 and increase by 3% in 2022. This will be a recovery from the covid-related -1.1% contraction during 2020. 

Even on these upbeat forecasts, output at the end of 2021 will still be -1.5% below that expected in the absence of covid. The key dynamics shaping the outlook are a spending catch-up (the pent-up demand created by the temporary covid restrictions) and a strong tailwind from policy stimulus, which has led to a booming housing market. 

The upcoming May 11 Federal budget will likely see another round of stimulus, suggests Westpac. With the 2020/21 Federal budget deficit tracking well ahead of forecast, there is believed to be flexibility for new measures.


Europe’s economic recovery has spluttered over the first three months of the year. The underwhelming vaccine rollout, an alarming third wave and an extension of lockdowns have combined to quash demand in the first quarter. This places Europe on the cusp of a second technical recession, according to strategists at Westpac Bank.

The most significant constraint upon demand has been lockdowns for the first three months of the year, which has delayed the reopening rebound that was set to follow the -0.7% contraction in the fourth quarter. Compounding this, Europe’s vaccine rollout has been lacklustre, crimped by supply constraints, a slow authorisation process and vaccine suspensions on health concerns. With little capacity to spend or invest since the start of the year, the Euro Area is poised for another contraction in the first quarter.

However, the activity outlook for the second half remains upbeat with Europe expecting a significant increase in vaccine deliveries in the June quarter. With furlough schemes and fiscal support continuing to cushion the consumer, a softer profile early in the year will be met by a brisk rebound in the second half. Westpac is looking for year-average growth of 4.2% in 2021 to be followed by 3.9% in 2022.

Fiscal and monetary policy is expected to remain supportive while underlying inflation is forecast to stay contained.

Aviva Investors largely agrees on the rebounding outlook. Despite lockdowns and slow progress on vaccination, encouragement can be taken from the experience in the fourth quarter when restrictions on activity did not have as large an impact on output and demand as had been feared. 

United Kingdom

The renewed national lockdown imposed in early January is likely to result in a small fall in GDP in the first quarter. However, the outstanding progress on vaccinations since December has boosted sentiment and should allow for reopening of the economy as scheduled and usher in a convincing rebound in activity in the second quarter and beyond. 

The UK is now set to regain its pre-covid level of output a year from now and should grow strongly this year and next, as long as control of the virus is maintained. 

One concern for the future, cautions Aviva Investors, is the potentially overzealous plans of the British government to tighten fiscal policy in future years. Their position stands out by comparison to almost everywhere else in the developed world, where more relaxed approaches are being adopted.

Westpac believes the UK is making visible progress towards full economic reopening. With a more developed and orderly rollout, accompanied by a sharp fall in new cases, PM Johnson is on track to reach his objective of removing all legal limits on social contact in June.


Japan should attain pre-crisis GDP levels by the end of 2021, with growth close to 3%. This is yet another upgrade compared to the last quarter and comes with further upside risks, asesses Aviva. This is due to public consumption, thanks to fiscal spending, which will remain supportive of growth even as the deficit shrinks.

Private consumption and finally investment will rebound in upcoming quarters, but gradually. The state of emergency will enable lockdown restrictions to ebb in the second quarter.

The Bank of Japan has recently tweaked its intervention policies though the song remains the same, including monetising the fiscal expenditure and not doing anything much about very low inflation, which should remain close to zero. 

“Suganomics” includes administrative reform, regulatory improvements and digitisation though the relatively new PM is dogged by recent scandals. He may seek a fresh mandate in snap elections, which would be positive in removing uncertainty and helping both domestic investment and foreign direct investment .

Emerging Markets 

Aviva Investors prefers to be slightly underweight emerging markets given they offer too little valuation cushion, due to the increased risks of rising US bond yields, weaker local currencies and tighter domestic monetary policy.

In contrast, Franklin Templeton believes there’s significant opportunity in emerging markets today, particularly in Asia, though geopolitical risks bear watching. Their conviction in the growing structural advantages of emerging markets, led by key Asian economies, has only strengthened as the evidence has accumulated. Emerging markets have remained relatively resilient, having successfully adapted to, or suppressed, the virus.

The covid-led divide in relative country performance has reinforced that China is now on track to become the world’s largest economy before the end of the decade. Franklin Templeton believes this trend will lead to allocations toward emerging markets, led by China, for years to come.

In China, biotechnology firms are developing innovative treatments for cancer and other major diseases and have won the confidence of global pharmaceutical groups in licensing these new drugs.

In macroeconomic terms, China’s economy is growing at a 6% annual pace in 2021, which is expected to lift annual GDP to nearly 10% above 2020’s depressed level. 

Aviva believes low inflation should keep the People’s Bank of China (PBoC) stance loose, with a bias to move to neutral if needed to contain leverage or financial speculation. 

Strategists at Westpac highlight GDP lost during the pandemic in China was recovered within three months and the economy gained a further 6.5% to the end of 2020. A year on from February 2020’s nadir, total fixed asset investment is up 35%. State-owned enterprise spending and private investment have been broadly in sync, gaining 33% and 36% respectively. Clearly this recovery has not stemmed from government largesse. Instead, it has been broad-based and focused on the long-term, explains the bank.

Taiwanese and South Korean semiconductor firms dominate the global industry with their strong manufacturing capabilities, especially in cutting-edge semiconductor chips. Moreover, their clout has generated the cash for them to ramp up investments and widen their competitive advantages amid booming demand for chips from high-performance computing, bitcoin, auto and other businesses. By comparison, western semiconductor firms have struggled to keep up, whether in innovation or capital expenditure, points out Aviva.

South Korean companies have also spearheaded the development of electric vehicle batteries, which have achieved greater penetration worldwide on the back of policy support and technology advancements. 

India’s internet space, which has been under-represented in stock markets, also offers huge potential, in Franklin Templeton’s view.

Technology/Innovation Investment Opportunities 

Franklin Templeton believes innovative businesses should continue to outperform over the medium to long term. Covid-19 uncovered the susceptibility of businesses that have failed to innovate and embrace digitalisation. 

The majority of the beneficiaries of work-from-home and e-commerce trends were already digitally savvy and continue to disrupt their target markets by enhancing the products and services they deliver (eg e-signature and telemedicine providers). 

Other innovative areas of technology have been held back by delays in implementation and adoption due to covid-19, which is no longer an issue. This gives Franklin Templeton confidence in a number of software names that support digital transformation, technology enablers of electric vehicles and solar energy as well as online dating platforms.

The genomics space continues to be a key area of innovation advancement. Genomics and gene sequencing were major contributors to finding therapies and vaccines for this virus. Now, the world has not only fast-tracked therapies, but has also built distribution and manufacturing capabilities that could make genomic advancements easier to implement in the economy in the future.

Looking ahead, it’s difficult for Franklin Templeton to see how these trends in innovation will slow down. However, impacts driven by individual country regulation or delays in new advancements due to technical requirements are possible. 

Shaw and Partners highlights valuations being currently applied to small and mid-cap ASX software stocks, are now back at their pre-covid levels. This is despite fundamentals that remain strong and have rarely looked better. Fineos Corp ((FCL)) is one stock that is leveraged to a global recovery and has been sold off too hard, in the investment manager’s opinion. The digital transformation of the life insurance industry is a multi-year (even decade) story that benefits the company.

In a similar vein, Nitro Software ((NTO)) and Whispir ((WSP)) have software products that are directly leveraged to where businesses are now spending. Specifically this is both digital document workflow and intelligent communication tools.

According to Shaw, longer term investors should use the sell-off in growth stocks caused by rising long-term interest rates to add technology, healthcare, electrical vehicle, renewable energy and other growth industry exposures to their portfolios.

During the pandemic the consumer has accelerated into an increasingly digital and interconnected world. In this environment mobile, trusted e-commerce and digital solutions have risen to the fore and delivered significant growth and alpha.

One of those beneficiaries is the Buy Now Pay Later (BNPL) sector globally. BNPL companies in the past 12 months have added a combined US$40bn in value as companies have gone public, re-rated, raised capital and delivered exceptional organic growth. 

Shaw estimates that the US is adopting BNPL faster than Australia by up to 40%. This accelerated dynamic is likely to see sector-wide valuations grow materially.

Against this dynamic, the key sector pick by Shaw is Zip Co ((Z1P)), one of the leading ASX BNPL companies with global operations. A significant pipeline of large merchants is expected to be converted. In the US the business will continue to accelerate and further geographic and product launches will occur. The investment manager highlights that Zip Co currently trades at the lowest multiple by comparison to peers and owns the fastest growing US BNPL brand.

Bonds and Credit

With manufacturing PMIs in the high 50s and prospects that services will join the party soon, as they already have begun to in the US, Aviva Investors maintains bearishness on longer-dated bonds. Shorter maturity yields are expected to remain low as, outside of emerging markets, most central banks will refrain from hiking for a while and live up to amended objectives (as per  the Federal Reserve).

Further rises in yields are starting to result in higher real rates, reflecting a mix of rate hike expectations and rebuilding of term premiums. This is a marked change in the financial environment.

Franklin Templeton believes bank loan instruments and high yield potentially offer lower sensitivity to rising interest rates. High yield should be positive, given continued improving fundamentals and valuations that have further room to run.

The US high-yield new-issue market has remained very active and Franklin Templeton has generally found new issue concessions to be an attractive way to pick up yield and spread.

To protect against volatile interest rates and inflation a portion of fixed income could be allocated to alternative asset investments such as hedge funds and commercial real estate. Hedge funds have the opportunity to go long the potential beneficiaries of higher financing costs and short those areas hurt by them. 

Within the Morgan Stanley International fixed income portfolio, the duration has been reduced. Overall, the trend towards more variable rate corporate debt continues in order to improve portfolio yield and lessen corporate default risk, which is low based on the current position in the economic cycle. The bank prefers sub-investment grade and variable rate securities within corporate debt to enhance the yield of portfolios.

During March, the RBA stated “The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3% target range. For this to occur, wages growth will have to be materially higher than it is currently". This will require significant gains in employment and a return to a tight labour market. The board does not expect these conditions to be met until 2024 at the earliest. So, based on the RBA outlook, rates will stay low for some time to come.

With interest rates still at historical lows and looking like remaining so until wages growth and inflation pick up, there is still high investor demand for income and yield based securities, notes Shaw. 

In Australia, performances of Floating Rate strategies have outperformed Fixed Rate strategies, as long Aussie bond yields rose even more aggressively than yields in the US over the last six months.

Higher Yield Floating Rate Securities have outperformed Investment Grade Floating Rate Securities, driven by investors searching for viable income alternatives. The capital price for Higher Yield Securities is influenced by credit spreads rather than interest rates, and will benefit the most from better company earnings and GDP growth inferred by the very reflation and higher long bond yields that have hurt fixed rate bonds.

Westpac Bank has brought forward the timing by which the Australian 10 year bond rate rises above 2% to December 2021 from March 2022. This reflects a slightly faster pace of increase in the bond rate than envisaged on February 19 when the bank raised the target for the end 2021 bond rate from 1.5% to 1.9%. This is a near term timing adjustment and the target of 2.5% for the 10 year rate by end 2022 remains intact.

Real Estate 

Looking forward, Franklin Templeton is quite optimistic about real estate’s growth prospects in 2021–2022 because of the fast US vaccination rollout, additional fiscal stimulus and robust consumer demand. 

Real estate is considered a derivative of economic expansion and all property sectors are likely to benefit from the pent-up demand and forthcoming jobs boom. 

Given a reflationary environment, income with growth should be an important part of portfolio allocation strategy. Historically, real estate as an asset class has shown to be able to hedge, at least partially, against inflation and rising interest rates largely because landlords generally can raise rents under improved economic conditions. 

Higher interest rates often link to better economic growth, which should lead to stronger demand for commercial space and higher income growth. This will likely offset the potential negative impact on financing costs, explains the global investment firm.


Franklin Templeton feels environmental, social and governance (ESG) awareness is increasingly vital for risk-management and for potentially better expected returns.

Stocks with strong environmental sustainability profiles generally performed well in 2020 as a result of a variety of trends. Franklin Templeton considers some of these to be secular trends that should support ESG sustainability-focused investments for the longer term. Examples include fighting climate change by lowering carbon emissions or overcoming resource scarcity through use of recycled materials. The investment manager believes that all investing will eventually be ESG investing and that one day it will no longer be considered a separate discipline.

Sustainability winners over the next market cycle could include discretionary names that are improving the sustainability of food sourcing and packaging. Also, Financials that are prioritising diversity and inclusion, and companies enabling energy efficiency and the use of electric vehicles are likely beneficiaries.


Westpac Bank notes that lately the US dollar has continued to receive support from developments offshore. In particular, in Europe the vaccine roll-out continues to disappoint, covid-19 new cases are proving very difficult to rein in and near-term growth prospects are suffering as a result. Japan is also struggling for traction in its health and economic response to the pandemic, leading investors to seek a better return elsewhere.

However, despite widespread support there has actually been only a marginal rise in the US dollar, despite peak economic momentum and a nadir in European pessimism. In addition, the market’s expectation of US rate hikes in 2023 could easily be disappointed given the degree of historical underperformance for inflation, the substantial labour market slack that remains in place and the Fed’s clear intention to set policy reactively.

As a result, Westpac forecasts a sustained downtrend in the US dollar to the end of 2022.

Aviva Investors is neutral on currencies, with the previous view of a broad-based weakening in the US dollar now more nuanced given the more rapid growth trajectory expected in the US compared to other regions.

Reflecting the erosion of the growth gap between the Euro Area and the US as the year progresses, Westpac expects the euro will appreciate from US1.2 at June to US1.23 by year-end, followed by a further push to US1.26 by June 2022.

Asia’s ongoing economic development, efficient production chains and the authorities' focus on productive investment and efficiency feeds into Westpac’s currency forecasts. It’s considered there is every reason to believe the region’s currencies will outperform the US dollar trend to the end of the bank’s forecast horizon, and likely beyond.

Westpac sees the recent US dollar rise as temporary and continue to expect the Australian dollar to lift to US85 cents in the first half of 2022, supported by elevated commodity prices and by gathering momentum for the global recovery.

Commodities and related equities 

Westpac Bank doesn’t believe we are in the midst of a new commodity super cycle. However, a combination of conservative investment strategies by the major miners, plus robust demand as the world recovers from the covid lockdowns, means the price of most commodities will remain higher for longer.

Strategists at the bank see an inflection point sometime soon for the iron ore market, which should start to move the market towards being in surplus in late 2021 or early 2022. It’s expected this shift will see iron ore prices ease to US$150/t by the end of 2021 and US$110/t by the end 2022. 

Westpac also forecasts an end of 2021 price of US$132/t for metallurgical coal, US$93/t for thermal coal and US$67/bbl for Brent crude oil.

In Shaw and Partners view, investors should gain quality exposure to equities that produce copper, nickel, cobalt and lithium, to gain exposure to the low-carbon future. 

Up to five times existing demand will be required as the energy transition takes place, whether that be across a range of technologies (e.g. copper for generation, storage and electric vehicles) or are concentrated in specific technologies (e.g. lithium and cobalt for batteries).

If electric vehicles follow the typical new technology adoption ‘S’ curve, the world is about to see exponential growth in penetration and exponential growth in demand for battery raw materials, predicts the wealth manager.

Gold and related equities 

Global money supply has been growing at the highest rates for over 60 years, explains Shaw. Post-pandemic money supply in the US alone has grown by nearly 20% over the past year. The gold price correlates well to the long-term growth in money supply suggesting that not only will the price be well supported in the near term, but also the medium to long term expectations could be re-based higher, potentially in the US$1,500-1,600/oz range.

Gold price performance is well correlated with falling interest rates, specifically real interest rates. Higher inflation over time combined with a tempering of nominal rates will likely see the direction of real interest rates move lower and stay lower for a while yet. This would see gold price stay at or well above current levels.

Gold equities are now the cheapest in Shaw's coverage universe and one standout selection is Northern Star Resources ((NST)) on valuation and medium-term growth upside. Another is Newcrest Mining ((NCM)) on valuation and unpriced growth options that should become more transparent in the quarters ahead.


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