Our multi-asset investment views - August 2022





A humbling month for our negative view on equities. Although company profits are weaker, headline earnings have been resilient overall.


Government bonds

We have reverted to a negative view. The market appears to be underestimating the lingering effects of inflation and valuations at current levels are difficult to justify.



Having been positive on commodities for the first half of 2022, we maintain a more balanced view today with supply constraints offset by weaker demand.



Given stagflationary concerns, our outlook remains cautious, with a preference for the US over European credit. Valuations are now fair, so the focus is on growth from here.




The US was previously our preferred market to be underweight. However, we have upgraded this view to neutral as fears of recession have traditionally been more supportive for US shares compared to other regions, due to the greater proportion of higher quality companies in the index.



Weaker demand is becoming an issue for energy companies in the index.



The European Central Bank (ECB) recently raised interest rates for the first time in a decade to combat rampant inflation. We believe this will impact share prices, particularly if the focus turns to winter energy supplies.



We have downgraded our view as recession fears are building, and Japanese equities could be weaker due to the cyclical nature of the index and the recent rebound in the yen.


Global Emerging Markets1

We downgraded our view to negative as emerging market shares do not traditionally perform well during recessions.

Asia ex-Japan



China was previously our preferred region but disappointing stimulus initiatives by the country’s government and valuations no longer looking cheap has led us to downgrade the region.



EM Asia ex China

We retain our negative view due to rising geopolitical tensions in the region, particularly in Taiwan.

Government bonds



We downgraded to negative as duration (which measures how much bond prices are likely to change if interest rates rise) has become expensive and is no longer useful for diversifying equities. Our negative view is focused on the short to medium areas of the yield curve (the relationship between the time to maturity and the interest rate).



We remain negative as with inflation still rising there is scope for the Bank of England (BoE) to raise interest rates higher.



We remain negative on German bunds, given that the European Central Bank (ECB) has been slow to raise interest rates despite rising inflation.



Our view is unchanged as returns to investors are still unattractive compared to other markets. Slowing global growth also remains a risk.


US inflation linked bonds

We have upgraded as we believe that the market has not fully priced in inflation expectations and is overconfident that the Federal Reserve (the US central bank) will bring inflation back down to 2%.


Emerging markets local currency bonds

Our view is negative with stagflationary as well as recessionary risks growing, leaving emerging market bonds vulnerable.


Investment grade credit



With valuations at fair value, we have upgraded our view as US growth remains firm and US investment grade returns have stabilised.



We have downgraded our view as the region is expected to experience a relatively aggressive slowdown.


Emerging markets USD

We remain positive as emerging market fundamentals are looking strong, and the region has priced in European risks.


High yield bonds (non-investment grade)



We have upgraded our view as spreads (the difference in yields between bonds of similar maturity but with different credit quality) have started to stabilise and sentiment has improved, with high yield outperforming investment grade.



The outlook for growth in Europe is less favourable than the US. Uncertainties over gas supplies to Europe next winter mean that the risks are more significant.





We remain neutral as energy is the sector most vulnerable to supply problems, with natural gas supplies stretched, particularly in Europe. Although the slowdown phase is historically negative for demand, current supply issues are proving supportive.



Gold tends to perform well when fears of recession are looming, and despite the market slump in July, gold prices appear to have recovered.


Industrial metals

Ex-China demand remains uncertain, production remains muted, and inventories are low, which could cushion the risks.



We have downgraded to neutral as input costs have started to decline and we believe we might have finally reached a peak in fertilizer and food prices.




US $

We continue to favour the US dollar as we believe it is too early to expect the Fed to change its current aggressive rate hiking stance. Against a backdrop of weakening global growth and falling equity prices, the US dollar remains a safe haven currency.


UK £

The turn in the cycle and the worsening stagflationary environment, coupled with political instability have weighed on the currency. The pound appears to have priced these factors in appropriately, leaving us neutral.


EU €

While the outlook for growth is not positive, we believe that current extreme levels of negative sentiment mean there is a possibility of a tactical rebound in the currency. We therefore move our view back to neutral.



We remain negative. The depreciation in the renminbi (offshore) is likely to continue, which should cushion the impact of reduced demand for Chinese exports.



We have taken a negative view on the Japanese yen for now as the policy of the Bank of Japan (BoJ) remains unchanged. However, some positive opportunities may arise in the fourth quarter following the appointment of two new BoJ members in July who favour higher interest rates.


Swiss franc ₣

We remain cautious on the Swiss franc after the Swiss National Bank unexpectedly increased rates.


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