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Our multi-asset investment views - May 2023

We maintain our negative view on equities, amid persistent inflation and a worsening of global economic conditions.

Read full reportOur multi-asset investment views - May 2023


Multi-Asset Investments

🟢 Long / positive

🟡 Neutral

🔴 Short / negative

🔼 Up from last month

🔽 Down from last month

Main Asset Classes

🔴 Equities

We maintain our bearish stance on equities (we expect prices to be weaker) as inflation proves to be persistent and economic conditions are worsening.

🟢 Government bonds

We remain positive as we expect the global economy to slow and interest rates to peak soon. If inflation reduces in line with consensus, bonds should remain supported.

🟡 Commodities

We stay neutral overall. As we start to see material cracks in the growth data, we anticipate a slowdown in commodity demand, with demand and supply broadly balanced.

🟡 Credit

We maintain a neutral score as valuations are still not attractive. Given the macro backdrop we do not believe spreads are compelling.


🔴 US

We believe that there is now enough evidence to show that US economic conditions are deteriorating. The Federal Reserve (Fed) may not raise interest rates further but is not expected to pivot until the labour market softens meaningfully.

🔴 UK

Although prices are low and have started to rise in recent weeks, we do not expect a full rebound to previous highs. We believe that the impact of a persistently tight labour market, high inflation and high interest rates have yet to be fully felt in the economy.

🔴 Europe

We remain negative as we believe European equities are no longer cheap and the region’s earnings growth forecast looks optimistic. The European Central Bank (ECB) is likely to remain in favour of higher interest rates for some time given persistent inflation and tight labour markets.

🔴 Japan

As we prepare to enter the ‘slowdown’ phase of the economic cycle, Japanese share prices are likely to be significantly challenged given the market’s cyclical nature.

🟡 Global Emerging Markets1

We remain neutral as inflation continues to be persistent in the US, and with emerging markets (EM) ahead of developed markets in the battle against inflation it limits opportunities for the asset class.

🟢 Asia ex-Japan, China

Valuations and economic activity have improved and early indications from high frequency data and PMI surveys suggest service sector activity has rebounded.

🔴 EM Asia ex China

As our expectation of a global economic slowdown looms, markets such as Taiwan and South Korea are likely to struggle as they are highly dependent on the technology sector.

Government bonds

🟢 US

Although valuations appear slightly expensive, real yields are still relatively high, and some cracks in the labour market have started to emerge. We are comfortable remaining modestly positive.

🟢🔼 UK

We have upgraded UK gilts to positive as headline inflation should fall meaningfully in the next couple of months as last year’s energy price rises drop out of the annual data. Gilts have also underperformed the recent rally in global bonds.

🟡 Germany

We have seen a modest fall in core inflation signalling that a peak could be near. The ECB has slowed the pace of interest rate hikes but has indicated it has not finished yet. We remain neutral for now.

🟡 Japan

We remain neutral as Japan is still battling high inflation, but the Bank of Japan’s new governor pledged to keep loose monetary policy unchanged.

🟡 US inflation linked bonds

We still prefer to take exposure through nominal bonds as we expect inflation to begin to moderate.

🟢🔼 Emerging markets local currency bonds

We have turned positive as EM central banks are ahead of developed markets in their hiking cycle to contain inflation. EM inflation is falling, and we expect more cuts to come.


Investment grade credit

🟡 US

High cash rates are setting a high benchmark for investment grade credit. This is particularly acute in US investment grade which is unattractive to hedge (to offset the risk of any adverse price movements) for European investors.

🟡 Europe

We remain neutral. European bonds appear more attractively valued than elsewhere, but it remains a tough market for credit as European financial conditions are tightening.

🟡 Emerging markets USD

A soft landing would favour EM debt, but until we have clearer signals, we prefer to stay away from this asset class.

High yield bonds (non-investment grade)

🟡 US

US high yield (HY) spreads are expensive for an economy moving into slowdown or recession with tightening financial conditions. HY issuance has been low for some time and serves as a technical tailwind, leaving us neutral.

🟡 Europe

Although there is still a premium for EU over US credit, this has narrowed, and we think largely reflects sectoral differences and real estate concerns.



🟡 Energy

The latest sell-off in oil markets seems overblown but does point to anticipated weakness in demand. We expect that OPEC will step in with cuts to balance the market.

🟢 Gold

We remain positive. Gold is favoured as we head into a slowdown, and the year-to-date rally allows us to be nimbler in increasing the allocation.

🟡 Industrial metals

With a dampening cyclical outlook, we remain on the side-lines as industrial metals are more cyclically exposed than precious metals. Fading developed market demand and a lack of activity growth in China does not support this market.

🟡 Agriculture

Moderating input costs compared to 2022 point to a more robust supply picture as the planting Like last month, we remain neutral on account of the trade cycle dynamics. The carry on offer (the return obtained from investing in assets in one currency versus the cost of borrowing in another currency) is still not looking particularly attractiveseason across many crops gets underway. We believe the upside potential in prices from here is limited and so retain our neutral view.


🔴 US $

We retain our negative view as we believe the Fed is heading towards a pause in its monetary policy. Concerns around the US debt ceiling also acts as a headwind for the currency.

🟢 UK £

We remain positive. We believe the pound will benefit from rates and inflation staying higher compared to the US, and therefore providing support for sterling.

🟢 EU €

We stay positive for similar reasons as the UK. We also expect interest rate differentials relative to the dollar to narrow, and more rate hikes to follow.

🟡 CNH ¥

Like last month, we remain neutral on account of the trade cycle dynamics. The carry on offer (the return obtained from investing in assets in one currency versus the cost of borrowing in another currency) is still not looking particularly attractive.

🟡 JPY ¥

As concerns shift from inflation to slowing growth, the yen could be viewed as a safe haven currency. However, we remain cautious as since the appointment of the new governor the yen has been weaker.

🟡 Swiss franc ₣

Like the Yen, the Swiss Franc is also considered a safe haven currency. We remain neutral for now as we still prefer the euro and pound relative to the dollar.


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

Source: Schroders, May 2023. The views for equities, government bonds and commodities are based on return relative to cash in local currency. The views for corporate bonds and high yield are based on credit spreads (i.e., duration-hedged). The views for currencies are relative to the US dollar, apart from the US dollar which is relative to a trade-weighted basket.

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Read full reportOur multi-asset investment views - May 2023


Multi-Asset Investments


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