While there has been an understandable focus on the outlook for inflation and interest rates in recent months, earnings are a key blank in the global equity outlook. We examine the latest batch of earnings results in the US and Europe and the outlook for 2022.

While the RBA maintained its cash rate and left the pace of QE unchanged, it did announce it is dropping its yield curve control policy along with its guidance for no increase in the cash rate until 2024. While the RBA has conceded some ground, it continues to emphasise patience.

After plunging to multi-decade lows in mid-2020, global energy prices have soared in recent months. Multiple factors on both the demand and supply side have combined to drive up the price of oil, and even more dramatically gas and thermal coal prices.

High inflation readings across many economies in recent months has led to talk of “stagflation”. To help put investors’ minds at ease we detail why the characterisation of the current (or near-term) economic environment as “stagflationary” is a fair way wide of the mark.

Our quarterly managed funds report outlines the pathway best-suited to deliver on our current asset allocation strategy.

While market volatility has picked up, the central tenant of our Q4 asset allocation outlook remains that the global economy will continue to grow at an above-average rate over the next 12 months and that central banks will withdraw policy support relatively slowly. With this backdrop, equities are likely to deliver solid returns over the next 12 months.

Equities have made a stunning recovery from the COVID-19 induced lows of March 2020. In the space of 18 months, US stocks have climbed 96% (US$) while Australian stocks have climbed 61%. While a correction feels overdue, we explain why this is not a certainty anytime soon and give context to our positive 12-month outlook for global and local shares.

The assumption of relatively low inflation is central to the pricing of interest markets and permeates through the current pricing of virtually all risk assets. So, any signs of a crack in the low inflation thesis (such as the dramatic spike in US inflation in Q2) need to be watched closely.