HEAD-TO-HEAD: Blackrock versus Capital Group

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INTRODUCTION

Global equity markets were whipsawed last year, between the lockdown of societies and economies and then the torrent of fiscal and monetary support by governments and central banks. Following a period of extreme volatility, the MSCI All Country World Index (ACWI) ended the year up 16.83% in 2020, according to FE Fundinfo data.

Many asset managers expect equity markets to maintain their momentum this year as economies recover. The World Bank forecasts the global economy to grow at 4% in 2021, after contracting 4.3% last year.

Goldman Sachs Asset Management believes that global equities remain attractive, “notwithstanding full valuations”, because they are “supported by low real yields, contained inflation, easy financial conditions, peak earnings, and a substantial equity risk premium”, the firm wrote in a recent note.

The subsequent success of the Democratic party to control both houses of Congress is also likely to prompt a short-term boost to the US economy, with President-elect Biden likely to push through an enhanced fiscal spending bill that might reduce unemployment, narrow the output gap and perhaps stoke inflation, argues Keith Wade, chief economist and strategist at Schroders.

On the other hand, even with the imminent availability of a Covid-19 vaccine, markets face the prospect of a short-term burst of growth, followed by uncertainties, as policymakers attempt to wean economies off the monetary and fiscal stimulus which helped bolster risk markets last year, Kevin Anderson, head of investments, Asia Pacific at SSGA, told a recent media briefing.

In this environment, SSGA favours growth and quality assets, particularly those in the US and China, although Anderson warns that there is limited room for additional [price-earnings ratio] multiple expansion, which has driven equity performance during the past two years.

“Instead, earnings must come through to support continued market performance, because the liquidity created by quantitative easing will be insufficient to sustain the upward trend,” he said.

Tai Hui, Asia chief market strategist at JP Morgan Asset Management, is also confident about the outlook for global equity markets, but recommends that investors need to diversity globally to some of the sectors that are worst hit by the pandemic, such as financials, consumer discretionary, travel, energy and commodities.

He also believes that the broader economic recovery should a benefit the beaten-up markets of Europe, the Asean and Japan.

Against this background, FSA asked Natalia Wolfstetter, director at Morningstar, to compare two global equity products: the Blackrock GF Global Dynamic Equity Fund and the Capital Group New Perspective Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 7 January 2021)

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