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Our multi-asset investment views - December 2022

Although we have moved negative again on equities amid growing fears on recession and corporate earnings, regions outside of the US offer more compelling valuations.



Multi-Asset Investments

🟢 Strong Positive

🔵 Positive

⚪ Neutral

🟠 Negative

🔴 Strong Negative

🔼 Up from last month

⏸ No change

🔽 Down from last month

Main Asset Classes

🟠 🔽 Equities

The latest bear market rally seems to have ended and we have moved negative again amid growing fears on recession and corporate earnings.

⚪ Government bonds

We see no reason for central banks to ease off the monetary pedal and continue with a neutral stance. Current valuations are now more realistic.

🔽 Commodities

China’s tentative steps towards a reopening should prove a positive, yet an impending economic slowdown should prove a negative.

🔵 Credit

We favour investment grade over high yield given recessionary fears, and shift our preference from the US to Europe and emerging markets on valuation grounds.


🟠 🔽 US

After the recent rally, we downgrade as we see no catalyst for this to continue. While the US economy is proving remarkably resilient, current valuations appear expensive.

⚪ UK

Although the domestic environment remains challenging, the projected weakness in sterling should provide some protection to the equity market.


With a near-term crunch in energy supply averted, a long-term solution has still to be found. Despite the difficult environment, valuations appear better than other regions.

🟠 🔽 Japan

With recession fears building, Japanese equities are likely to be tested by the economically sensitive nature of the index. The recent strengthening in the yen will be an additional headwind.

Global Emerging Markets1

Recessionary risks are traditionally not supportive for emerging markets. However current valuations reflect this, and the Chinese reopening should be a boost. A stable, and perhaps weaker, dollar should also help. We therefore remain neutral.

Asia ex-Japan, China

We keep our neutral view as valuations appear attractive relative to developed markets, and from the positive sentiment attributable to the gradual reopening of the economy.

EM Asia ex China

The region should get a boost from a Chinese reopening, but fears over a global downturn dominate.

Government bonds

⚪ US

The Federal Reserve (Fed) appears to be nearing the end of its rate rising cycle, but continuing strong labour market data suggest rates will remain higher for longer than the market expects.

🔼 UK

We have moved to neutral as we expect yields to remain range-bound with a slowing economy, falling house prices, and low consumer confidence offset by the need for further rate rises and persistent inflation.

🔼 Germany

We have upgraded to neutral as while European Central Bank (ECB) rhetoric has turned noticeably hawkish, bund yields have moved to reflect this. Monetary policymakers are often described as hawkish when expressing concerns about limiting inflation.

🔼 Japan

Absolute yields are still unattractive compared to other markets, but the Bank of Japan’s (BoJ’) adjustment in yield curve control (YCC) has moved us to neutral. YCC is one method by which a central bank can control longer-term interest rates, by buying and selling bonds to hit the rate target.

⚪ US inflation linked bonds

With US 10-year real (adjusted for inflation) rates above 1.5%, we believe that inflation expectations are now more realistic.

🔵 🔼 Emerging markets local currency bonds

We have upgraded to positive on valuations. Latin America shows signs of peaking inflation, helped by an early hiking cycle. Real (adjusted for inflation) yields versus developed markets, especially the US, present an attractive opportunity.


Investment grade credit

🔽 US

Our long-term view remains reasonably positive, but more attractive credit spreads can currently be found in Europe and emerging markets. The credit spread is the margin that a company issuing a bond has to pay an investor in excess of yields on government bonds and is a measure of how risky the market perceives the borrower to be.

🔵 Europe

European investment grade (IG) spreads are close to levels last seen during the Covid outbreak, and so appear to have priced in too much bad news.

🔵 Emerging markets USD

We remain positive as emerging market fundamentals are looking relatively strong, and prices in the region reflect the recent rise in geopolitical tension.


High yield bonds (non-investment grade)

🟠 🔽 US

We have turned negative as a tightening in spreads and the relative size of the US loans market will make the sector vulnerable in the event of a downturn in the US economy.

🔵 Europe

In comparison to the US, European high yield (HY) bonds are trading on more attractive valuations while exhibiting superior quality.



 🔽 Energy

We have downgraded to neutral. Immediate supply side pressures have eased, and an economic downturn suggests price decreases. Longer-term, we err towards a positive view given a Chinese reopening and fractured supply chains.

⚪ Gold

Gold tends to perform well when fears of recession are looming. Yet a weaker US dollar may limit any gains.

⚪ Industrial metals

Slowing global demand is being offset by tight supply. A Chinese reopening would be a positive but a downturn, especially in Europe, would put pressure on prices.

⚪ 🔽 Agriculture

We have downgraded to neutral as while many key agricultural stocks appear low, input costs (fertiliser and energy) are starting to fall.


 US $

Linked to our view that market expectations for Fed rate hikes now better align with our own expectations, we maintain our neutral view.

🟠 UK £

The turn in the cycle and the worsening stagflationary environment has weighed on the currency. We doubt the Bank of England (BoE) can raise rates as far as markets expect given the economic outlook. Stagflation describes a situation where growth is low or slowing at the same time as inflation remaining high or rising.

 EU €

While the outlook for growth is not positive, we believe that current extreme levels of negative sentiment mean there is an possibility of a tactical rebound in the currency.

 CNH ¥

Positive moves on a China reopening should benefit the renminbi (offshore), as well as other Asia-focused currencies, and we have moved up to neutral.

 🔼 JPY ¥

We have moved our view to neutral as the yen is the most undervalued G10 currency, and as the recent change in BoJ bond policy is providing some support.

⚪ 🔼 Swiss franc ₣

The Swiss franc is better shielded from the energy crisis than the rest of Europe. As a result, the Swiss National Bank may not hike rates as aggressively as the ECB or Fed, leaving us neutral.


Global Emerging Markets includes Central and Eastern Europe, Latin America and Asia.

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