Exposure rates of the Dorval Asset Management Range – 23rd December 2021

With rising prices creating obstacles for households and central banks beginning to take steps in response, President Biden’s $1.75 trillion Build Back Better plan could be the first victim of the inflation theme.

Should we celebrate or commiserate? The answer will ultimately lie in the scenario for the Covid-19 pandemic, the outcome for bottlenecks and the pace at which Americans return to the labor market.

West Virginia’s Democratic Senator Joe Manchin has definitively hamstringed the latest version of the Build Back Better plan, citing concerns on its potential inflationary effects, among other points. Subsequently, Goldman Sachs’ economists responded by downgrading US growth for 2022 by 0.3 percentage points to 3.5%, a move that can largely be attributed to the end to the Child Tax Credit at December 31, 2021, which equated to $3,000-3,600 per child per year depending on their age: the tax relief will not disappear entirely, but will be much less generous.

However, broader renegotiations on the Build Back Better Act are not entirely dead in the water, with talks set to resume in January. In any case, the surprise return of inflation alters the policy mix i.e., the very specific blend between monetary and fiscal policy. With weaker fiscal stimulus, the central bank will have less need to tighten policy to tackle inflation, so this is not bad news for the financial markets.


With no major change in our scenario, we maintain both the risk exposure and investment themes for our portfolios.


We wish you all a very happy and healthy holiday season.



Download the weekly letter in PDF version: Exposure rates of the Dorval Asset Management Range – 23rd December 2021

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