While market volatility has picked up, the central tenant of our Q4 asset allocation outlook remains that the global economy will continue to grow at an above-average rate over the next 12 months and that central banks will withdraw policy support relatively slowly. With this backdrop, equities are likely to deliver solid returns over the next 12 months.

The final quarter of 2021 is likely to be dominated by several competing cross-currents that have the potential to reshape the investment outlook. We preview four themes likely to dominate 4Q21 and the impact of each on members of the Wilsons Australian Equity Focus List.

There is no doubting the importance of the global energy transition as the world moves toward its net zero 2050 target. However, recent events in respect of both renewable and legacy energy supply disruptions across the globe have driven sharp rises in oil, gas and coal prices. Here we explore the impact of the energy sustainability pivot on the Australian energy sector.

Equities have made a stunning recovery from the COVID-19 induced lows of March 2020. In the space of 18 months, US stocks have climbed 96% (US$) while Australian stocks have climbed 61%. While a correction feels overdue, we explain why this is not a certainty anytime soon and give context to our positive 12-month outlook for global and local shares.

The recent global macro concerns centered around China property developers have coincided with a seasonally weak period for equity markets. This creates an opportunity to add a high growth exposure to the Focus List. In response, we are adding further structural growth exposure to Wilsons Australian Equity Focus List with the addition of SEEK (SEK) following the removal of Sydney Airports (SYD). 

The assumption of relatively low inflation is central to the pricing of interest markets and permeates through the current pricing of virtually all risk assets. So, any signs of a crack in the low inflation thesis (such as the dramatic spike in US inflation in Q2) need to be watched closely.

Healthcare A-REITs have two powerful themes behind them. Firstly, the mega trend of growing healthcare expenditure, which is expected to grow at close to double GDP into the foreseeable future. Secondly, the institutional ownership of healthcare property remains low in Australia by global standards. With healthcare exposed A-REITs largely undiscovered in Australia, we share our view on the compelling growth story within A-REITs and why we have HealthCo Healthcare and Wellness REIT (HCW) to the Wilsons Australian Equity Focus List.

Last week’s RBA September meeting flagged a tapering of bond purchases, with its base case being positive economic growth in Q421 and solid growth through next year. Just a week earlier, at its US Jackson Hole conference, the US Fed hinted at a likely tapering of its bond purchasing program before year-end, although it left the exact timing open-ended. So, what exactly are the implications of a winding down of QE and will it spell trouble for the stock market?