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Our multi-asset investment views - September 2022

Although we remain negative on equities, we have upgraded government bonds to neutral as valuations and market expectations are now more realistic.





We remain negative on equities as we expect further weakness in company earnings.


Government bonds

As expected, US Federal Reserve (Fed) chairman Jerome Powell reiterated the US central bank’s commitment to bringing inflation under control. We have moved to a neutral stance as valuations and market expectations are now more realistic.



We have upgraded our view, as supply in the energy and agriculture markets remains tight.



We maintain our neutral stance as credit will be less affected by a potential recession than equities.




We continue to prefer the US, driven by the search for high quality companies. We believe that US companies should hold up better than their global counterparts.



We maintain our negative stance despite the recent rebound in energy as we believe lower demand going forward will weigh on the index.



The region has seen a record rise in interest rates to curb inflation. We believe the window for further rate rises is now limited and this, coupled with the natural gas crisis, is an unfavourable mix.



Recession fears are building, and Japanese equities are likely to be weaker due to the cyclical nature of the index.


Global Emerging Markets1

Recessionary risks are traditionally not supportive for EM equities and the region also continues to be affected by the strong US dollar.

Asia ex-Japan



Although share price valuations have fallen back, they are not yet at levels where they are attractive.



EM Asia ex China

We maintain our negative stance due to ongoing geopolitical tensions in the region.  This is particularly the case for Taiwan.

Government bonds



We have upgraded our view to neutral as market expectations for interest rate rises by the Fed are now better aligned with our own expectations and valuations are no longer expensive.



We have upgraded our view to neutral as we feel the market is now oversold, presenting an opportunity to benefit from higher yields.



We remain negative on German bunds as we believe that the market is still underestimating the desire by the European Central Bank (ECB) to raise interest rates.



Yields remain unattractive compared to other markets. Slowing global growth also remains a risk.


US inflation linked bonds

We have downgraded our view to neutral. With US 10-year real rates above 1%, we believe that inflation expectations are now more realistic.


Emerging markets local currency bonds

We have upgraded to neutral. Latin America shows signs of peaking inflation, helped by an early rate hiking cycle. Real yields compared to developed markets, especially the US, present an attractive valuation opportunity.


Investment grade credit



Our long-term view remains positive as spreads are attractive. However, we need more clarity on the extent of recession risks before adding.



Similar to the US, our long-term view is that corporate debt spreads (the difference in returns due to different credit quality) are attractive. However, uncertainties around the European energy situation and its impact on corporate activity keep us on the side-lines for the moment.


Emerging markets USD

We remain positive as emerging market fundamentals look relatively strong, and the region has priced in the recent rise in geopolitical tension.


High yield bonds (non-investment grade)



We upgraded to positive as valuations have improved meaningfully.



We have upgraded this month based on significant value and on the assumption that there will be a coordinated fiscal package.





We have upgraded to positive as prices do not appear to reflect underlying fundamentals. Even though demand has shown signs of slowing, we believe markets have priced in excessive levels of pessimism.



Gold tends to perform well when fears of recession are looming. However, in the face of tightening money supply, the outlook for gold appears balanced.


Industrial metals

Ex-China demand remains uncertain, production remains muted, and inventories are low, which could limit the downside risk.



We have upgraded to positive as key agricultural commodities, such as corn and soybeans, appear to be cheaply priced. This presents an opportunity in a market where supply-side concerns have not alleviated, and inventory levels are very low.




US $

We believe that market expectations for Fed rate hikes are now better aligned with our own expectations, so we have downgraded the US dollar to neutral.


UK £

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


EU €

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



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



The Japanese yen is very sensitive to the pricing of other developed markets, we expect further weakness in the near term for the currency.


Swiss franc ₣

We remain neutral as the Swiss franc is better shielded from the energy crisis than the rest of Europe. As a result, the Swiss National Bank may not raise interest rates as aggressively as the ECB or Fed.


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