September 2020 Investment Report

October 21, 2020
Investment Updates

In late August 2020 the US Federal Reserve officially relaxed its inflation target of 2% saying that it may let inflation run above that level into the future, before it next raises interest rates. Last time the Fed raised interest rates(four times in 2018) it was precisely to combat the prospect of future inflation amidst a tightening labour market. And while markets initially interpreted the Fed’s new policy as meaning bond yields will stay lower for longer, this new policy is stimulatory and means that long bond yields can start to rise without inflation. Why? Because without the Fed being on watch for a specific level of inflation, and being willing to pre-empt it, markets will now have to be more vigilant.

While the Fed’s new policy is a necessary, but not sufficient condition to actually achieve inflation, coupling it with global economies in the midst of re-opening and the largest-stimulus-ever working its way through financial systems, the risk of inflation has indeed risen.

Mirvac: Sustainability leader

During the month we met with the Mirvac sustainability team. Mirvac continues to be an ESG leader in our view and it is a company where over time the market will continue to assign a higher rating to the stock as a result. Sustainability “is” the business at Mirvac. It isn’t an afterthought or a set of strategies added on to the core business strategy. The company’s sustainability positioning statement of “Reimagine Urban Life” is particularly interesting given COVID19. We asked if it was time to “reimagine” Reimagine Urban Life given the changing lifestyle trends of work from home, less time in cities, preference for landed houses over apartments and so on during and post COVID19.

Full update attached

Download Now

Other Views & Insights