Overweighting the 'normality' of the future

What lessons can we learn from the past?

For all of those who assumed (hoped?) that the world would get back to normal quickly after the arrival of various vaccines, there continue to be disappointments aplenty. However, that should not stop portfolio managers, who should be focussing on what the future of that 'normality' will look like.

The shape of the recovery is causing some puzzlement amongst the investor fraternity. Ten year treasury yields are not doing what many wanted them to. Commentators have become obsessed with inflation. Barely a day passes without forecasts of lasting or transitory inflation and speculation over when interest rates are set to rise. Treasury yields spiked to nearly 1.8% in February, which immediately triggered forecasts that they would go above 2% or even 3%. One of my pet hates is hearing the word ‘normalisation' when used in terms of interest rates - if, after 13 years since the global...