To recap, it was on 23 March 2020 when the S&P500 hit its bottom after the COVID-19 crisis sent the equity benchmark tumbling. History indicates that after big market declines, strong bull markets usually follow with gains carrying into a second year. However, we should expect a lower return than the first year with pullbacks along the way.
In our perspective, we believe the equity market should still be registering positive returns for the year. This is predicated on our beliefs that the global economic growth would surprise on the upside given anecdotal evidence that various governments around the world are putting in their best efforts to open up their economy as soon as practicable. Arguably, investors may still be underestimating the rebound of the economy. So far, we are seeing GDP forecasts being revised upwards repeatedly in recent times. This should filter down to upward revision in corporate earnings correspondingly. April also started with corporate earnings coming in strong from US biggest banks like JP Morgan and Goldman Sachs, the bellwethers of the economy.
The strong growth will also mean that ultra-easy monetary policies will be reversed at some stage in future where policy frameworks become less business-friendly, to be accompanied by higher taxes and stricter regulations. We will leave these topics to be discussed in our future newsletter.
On the geopolitical front, we have mentioned in the past that there would not be material changes from the Trump era. The US recently tabled a new bill (Strategic Competition Act of 2021) which, if passed, will lead to a coordinated and comprehensive effort in dealing with China. This supports our view that the Sino-US relationship is unlikely to improve in 2021. The renewed efforts to contain Chinese advancement in technology and manufacturing capabilities should come as no surprise to market participants too. As such, this factor has already been discounted by the markets in our opinion.
In the latest climate summit of 40 top leaders, they have made a commitment to curb domestic greenhouse gas emissions and tackle climate change. This is an important milestone as major governments embark on a synchronised effort on this matter. For information, this is an investment angle that we have been seriously considering when building positions in our portfolio.
The narrative of higher inflation and higher growth after the crisis is gaining attention after the easy stance adopted by Central Banks and Governments around the world. This economic regime has not taken hold in a sustainable way yet in our opinion. This also means the process of material rebalancing of risk premium and portfolio reconstruction from our portfolio is still nascent. In a world of stretched equity and bond valuations, our way of assessing the markets remains focusing on relative value within and across asset classes. The Public Equity space is still an attractive investment option for us, and we are adopting a diversified approach in looking for the right disruptor companies for our portfolio.