All outlooks

Investment outlook third quarter 2021

"In this outlook for the third quarter of the year, we will briefly discuss four current topics: reopening after the pandemic, inflation, notable geopolitical trends and sustainability."

"Habit is the deepest law of human nature."

- Thomas Carlyle

World economy

Lifted restrictions, reopening societies and the progress of the vaccination roll-out dominate investment outlooks again this quarter. In this outlook for the third quarter of the year, we will briefly discuss four current topics: reopening after the pandemic, inflation, notable geopolitical trends and sustainability.

Developed markets, which are miles ahead with their vaccination programs compared to the rest of the world, are expeditiously re-opening their societies. Worldwide 2.8 billion vaccine doses have been administered. 23% of the global population has now had at least one jab and every day 42 million more doses are dispensed. The number of infections is falling. New mutations of the virus and local surges are likely to continue to dominate the news for some time to come. Even so, in the face of sharply rising infection rates in the UK, its decisive vaccination program seems to be preventing increased numbers of ICU hospitalizations and deaths.

Many economic data published at the moment are distorted by ultra-low figures of the lockdown in the same period last year. For example, world trade increased by 25%, US production of consumer goods by 14.5% and sales in Japanese department stores by 65% from the same period last year. These data say as much about how bad the figures were last year, as they do about how good they are now. Interestingly, there are also statistics that weren’t affected much last year and are still remarkably up this year. For example, the UN world food price index increased by 40% and container freight prices for transportation from Shanghai increased by 27% compared to pre-Covid levels. We expect societies to seize upon the opportunity of easing restrictions to return to old habits. A good example is the mass gatherings of football fans in the current European Championship where adherence to basic precautions and rules seemed mostly absent.

Recent economic data indicate that specifically supply capacity may be significantly constrained as societies reopen. The aforementioned food and transport price movements are not the only examples. Staff is hard to come by for many companies without offering better terms and pay. And commodities, including energy, are up from January 2020 levels across the board. Because of these developments recent price statistics point towards inflation. In the US, one of the first nations to reopen, the consumer price index (CPI) was up 5% in the month of May. European CPI was up only 2%. The Federal Reserve has not (yet) responded with monetary policy changes. Their policy committee expects the current high level to be only transitory. Financial markets have also reacted moderately to the highest inflation figures since 2008, which is apparent from the falling 10 year interest rate. Aging populations and technological progress are often heard arguments for prolonged periods of low inflation. The Laaken investment committee continues to be critical towards adding interest rate risk in the portfolios. Recent higher CPI rates can affect wages and the unprecedented accommodating monetary policies continue to pose inflation risk.

Geopolitically, we continue to closely monitor the developments between the West and China. China’s rhetoric is hardening and the risk that China will attempt to seize control over Taiwan is increasingly present. A recent meeting between the two leaders of Russia and the US may be the start of some sort of restoration of the tense relationship between the two countries. In Europe, the upcoming German elections will be an important event.

Finally, financial markets have shown an interesting development this year in sustainable versus non sustainable investments. Like every other asset manager, Laaken has had to formally assess if and how it considers sustainability in our investment decisions. Please visit our new website for more information. Partly because of the high valuations of distinctly sustainable equities such as Vestas and Orsted last year and because of remarkably higher energy prices, non-sustainable, lower priced equities performed relatively better. Energy equities such as Royal Dutch Shell are often included in sustainable funds and because of the popularity of these funds the representatives of the investors now have a real say. Management of the companies are being pressured to reduce profitability in favor of sustainability. Remarkably, this trend could actually lead to a reduced supply of energy, with higher energy prices as a result.


The themes discussed above are all factors that are weighed by the Laaken investment committee in our investment policy. Please find a brief discussion of our current policy below.

Fixed income

Portfolios are balanced between interest rate risks and negative interest charged by the custody banks. Bonds with a positive effective return, limited credit risk and an acceptable duration are added to the portfolios. Generally, bonds are underweight versus their neutral allocation. USD denominated bonds have been further reduced because of the decreasing interest upside versus Euro denominated bonds.


We maintain an overweight allocation to equities, against a background of historically low interest rates and high market valuations. Our investment policy focusses on individual selection of equities and valuation is key in this selection. Our equities are mainly a selection of lower priced companies such as Fresenius and reasonably valued companies with higher growth prospects such as S&P Global. During the last quarter, the top three contributors in euro were Partners Group (+20%), Alphabet (+20%) and Nike (+16%). The bottom three performers were Interactive Brokers (-10%), Keppel REIT (-5%) and AmerisourceBergen (-3%). If interest rates climb, a correction of the higher priced growth stocks could be a risk, but such a correction should be offset in the long term by net profit growth.

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