The third quarter of 2021 generally delivered small positive returns to diversified portfolios. We discuss why a small positive return can sometimes be more reassuring than a large one. We look at the factors and uncertainty impacting growth in the major world economies. There are supply chain problems developing. Inflation is starting to rise with the Reserve Banks slowly raising interest rates to keep inflation under control.
China is going through a regulatory crackdown on social media. There is also a push to less reliance on coal fired power stations, and a clampdown on leverage. The clampdown on leverage has resulted in liquidity problems with some large Chinese property developers such as Evergrande. We discuss why its not all doom and gloom and look at the positive impacts of these changes.
As usual there is a quick overview of the key movements in each investment asset sector that have impacted portfolio returns this quarter.
In our feature article we discuss behavioural finance and how this influences our pre conceived ideas. There have even been Noble prizes awarded in this area of psychology. Anchoring bias occurs when we place too much emphasis on pre-existing information when making a decision. There are many times in our lives when this plays out. We discuss how this can influence our shopping habits.
Click here to download the full pdf version third quarter 2021 Economic Commentary