“Pessimism pot” wrongly stirred: Insync

Yasmine Raso

Senior Journalist, Financial Newswire

6 February 2023

Insync Funds Management has gathered further evidence to substantiate its views held in its 2022 whitepaper and contradict the assertions “stirring the pessimism pot”.

The assertions made by the fund manager in its whitepaper titled Will the second half and beyond for equities be different to the first? ranged from decreasing inflation of the prices of products leaving China to an expectation of inflation slowing and settling around its longer-term norm.

“We disagreed with those pessimistic assertions then, and in the face of further evidence, we still disagree,” Insync Portfolio Manager, John Lobb, said.

“The factory gate prices of Chinese manufacturing plants have now declined at -1.3% over the last year.

“This is exactly what it is heading towards. Five-year inflationary expectations are now congruent with the 5-10 year inflationary expectations (2.3%) which will calm the nerves of the FOMC.

“It has always been our view that long term inflation expectations will not revert to those of the recent abnormal past of around 2% due to a less (internationally) mobile labour force and a higher degree of onshoring.

“Nevertheless, the FOMC’s expectations will also be tempered by their assessment of the new global regime, mainly attributable to the re-evaluation of geopolitical risk by large corporates.”

Lobb also said carbon energy supplies have also toppled the expectation it would present inflationary pressure.

“It fell even further than we predicted,” he said.

“In more normal times, central banks largely ignore the ebb and flow of global energy and food prices.

“However, in today’s conditions where the labour force has contracted, rises in food and energy prices may strengthen the case for higher rates since pay demands could create a more sustained impulse to inflation.

“Perhaps for those investors that hold a pessimistic view, it may be time to question this, to deploy assets towards those equites that are primed to deliver above average earnings growth in a mediocre at best, GDP environment.”