Hello. This is Jeremy Richardson of the RBC Global Equity team here with another monthly update.

Now when we last spoke, I raised the issue of three main things that I felt the market was concerned about: Chinese technology; the rollout of the Delta variant; and whether or not current inflationary pressures are transitory or not.

On the first of those, we are continuing to see a more muscular interventionist attitude by the Chinese government around the digital economy, with a particular focus on a handful of subsectors. We might think about the education industry. We might think about delivery and also the gaming industries as being real focuses of recent attention.

This is causing a degree of uncertainty, I think, for many investors because they’re not used to the rapidity and the speed with which these announcements are being put forward. But I would argue that many of the issues that the Chinese government is seeking to address have actually got very strong parallels with existing issues that many of the investors will already be familiar with.

Let’s just take the delivery industry for example in China, where the Chinese government is saying that delivery drivers need to be paid at least the minimum wage. I think many of us will understand that there are strong parallels between that sort of policy stance and the debate we’ve been seeing in some areas of the west, particularly around things like ride hailing and the gig economy where these such issues are also considered incredibly important.

So the manner with which we get to a resolution of these issues may differ, but the nature of the issues, it seems actually very similar irrespective of the geography.

The second thing I wanted to come back to you was around Delta, and here there’s been, I think, some positive news at the margin. Of course, over time, it’s given countries the opportunity to increase the level of vaccinations, so we’ve been seeing good progress now in places like Japan, like Australia, like New Zealand. And with every vaccination that goes into somebody’s arm, the threat of more sustained significant disruption caused by the Delta variant diminishes. So good progress. Still with us; we’re not out of the woods yet, but I think the progress that is being seen of some of these less vaccinated countries is actually encouraging.

And the final thing I wanted to come back to you is around these inflationary expectations because here, too, there’s been some, you know, more recent developments, really, I think, around the overlap of inflation with the COVID recovery.

And this is leading to an increase in these inflationary pressures, arguably driven by the supply side, and in particular, the inability of supply chains to respond to this pickup in aggregate demand that we’ve seen from pandemic recovery. And companies are telling us that even seemingly mundane things like shipping containers are increasingly hard to come by; logistics, transports, and just making sure that things stay on the shelves is a daily challenge.

And they are beginning now to have a debate amongst some central bankers as to whether or not the monetary policies that were put in place in the teeth of the pandemic are now actually in some way contributing to these inflationary pressures, which might sound a little sort of perplexing, but if you think about it in terms of the aggregate demand meeting aggregate supply, to the extent that interest rates are low and that’s helping this sort of consumption-led economy, coupled with that recovery, then whether or not you’re going to be able to sell any more cars, arguably, is not to do with aggregate demand but whether or not the factory can actually produce them. And as we’re seeing shortages in many supply chains, that seems to be the limiting factor rather than on aggregate demand.

And so, you know, it wouldn’t surprise me if we see now the more sort of introspective debate amongst many central bankers as to whether or not monetary policy perhaps needs to change a little bit sooner rather than later in order to acknowledge the fact that, in some part, they may be contributing to some of these supply chain issues.

These supply chain issues are actually being experienced in terms of sourcing of products but also in terms of labour costs. And when we listen to what companies are saying, this—there seems to be very much to the front of management’s mind. They are experiencing cost pressures within the businesses. There are some daily challenges in making sure that businesses continue to operate effectively. And when you’ve got high levels of demand and an inability to supply, you know, something’s got to give and that issue is price.

Now for companies, this is potentially a challenge, but there’s a route out of this which is if you’ve got pricing power, if you’ve got the ability to be able to manage your business in a resilient way such that you’re able to sort of navigate a path through these conflicting forces. And, you know, we would hope as investors in the portfolio we would like to think of great businesses at attractive valuations, that the thing that the companies in the portfolio have to their advantage that will hopefully mean that they will be able to navigate their way through these conflicting forces is a competitive advantage.

And if you have a strong competitive advantage, then you have the ability, we hope, to be able to, you know, arrange your affairs and arrange your go-to-market strategy such that you’re able to continue to delight customers, you know, deal with your suppliers fairly, and also to deliver value as part of that to other stakeholders when including shareholders.

So, you know, that’s where we’re sort of focusing, continue to focus our attention, whilst all the time keeping an eye on the overall risk environment and the sort of more systematic exogenous issues like Delta, like changing government regulations, like inflationary expectations, which have the power not necessarily to drive return, but have the potential for any portfolio to drive volatility.

And so by putting the two things together, we’re continuing to hopefully drive an attractive risk-adjusted return for our investors.

I hope that’s been of interest and I look forward to catching up with you again soon.