Our multi-asset investment views - April 2022





The Federal Reserve (Fed) has begun its much anticipated hiking cycle indicating that it is also looking to start withdrawing liquidity from the system (as liquidity is withdrawn, or liquidity conditions tighten, the availability of funds becomes less ample). We remain negative in an environment of tightening liquidity and peaking growth momentum.


Government bonds

We have upgraded to neutral as although inflation and growth data remain elevated,  momentum is slowing and Omicron concerns are fading.



The increased geopolitical risks stemming from Russia’s invasion of Ukraine combined with the imbalance between supply and demand are likely to remain supportive.



We continue with an overall neutral rating as our outlook on credit remains cautious given stagflationary concerns, stagflation being the combination of slowing growth and accelerating inflation. Company fundamentals, nonetheless, remain resilient.




Valuations in the US suggest that this is a market that is particularly vulnerable to the withdrawal of liquidity and the widening of the “equity risk premium”. The equity risk premium is the return from equities in excess of that from “riskless” asset such as cash.



The defensive and commodity biases in the FTSE index mean that the UK market should better withstand the geopolitical headwinds compared to other markets.



The region is closest to the Russia/Ukraine conflict, which remains volatile. Additionally, it is subject to potential uncertainty from the French elections.



We remain neutral as the market is in some senses distanced from the conflict in Europe. The effect of imported inflation, however, remains to be seen.


Global Emerging Markets1

We remain neutral as valuations are attractive but an improvement in global conditions are a required trigger for any meaningful upside.

Asia ex-Japan



Lockdowns and supply bottlenecks continue to negatively impact trade flows, however Chinese policymakers have recently shifted their focus to support growth via easing of monetary policy. Monetary policy covers measures taken by central banks designed to regulate economic growth and include changes in interest rates.



EM Asia ex China

The Korean elections are now over but we believe that other regions in the emerging markets universe appear more attractive.

Government bonds



We maintain our negative stance as even though bond markets have moved a long way, we believe we are still only at the beginning of the rate hiking cycle. Sentiment continues to point towards tighter monetary policy.



We are neutral as although gilt yields have moved significantly in recent weeks, we believe too many rate hikes are currently priced in and that the risk of a recession is not imminent.



The European Central Bank (ECB) has U-turned on a number of statements this year, and has removed its prior guarantee to not raise rates in 2022.



The market continues to offer negative yields, which provides poor value in a portfolio context. The Bank of Japan is not expected to intervene anytime soon.


US inflation linked bonds

We remain negative as uncertainty from the Russia/Ukraine crisis appears to have peaked and now the Fed’s top priority is to contain inflation.


Emerging markets local currency bonds

Our view is unchanged as the economic environment remains challenging with stagflationary as well as recessionary risks mounting.


Investment grade credit



Unlike its counterpart in Europe, we think the Fed is unlikely to support the credit market any time soon.



We believe that the ECB will continue to keep all options on the table with regards to policies to support the credit market and so we retain our positive score.


Emerging markets USD

We have downgraded to neutral due to the rapid compression in credit spreads seen in emerging market investment grade bonds. The credit spread is the margin that a company issuing a bond has to pay an investor in excess of government yields and is a measure of how risky the market perceives the borrower to be.


High yield bonds (non-investment grade)



We expect credit spreads to widen further in a market where subdued price action year to date looks anomalous.



Our base case is that the tension in Ukraine is now chronic. We have therefore upgraded our view to positive due to the relative stabilisation.





While the supply of oil has tightened further since Russia’s invasion of Ukraine, Chinese authorities have imposed lockdowns following a fresh surge in Covid-19 cases. The risks of a prolonged lockdown is likely to dampen the demand for energy.



Following the Fed’s decision to increase interest rates, we are one step closer to peak Fed hawkishness. Monetary policymakers are often described as hawkish when expressing concerns about limiting inflation. In addition, rising geopolitical and inflationary concerns will likely benefit gold.


Industrial metals

Demand outside of China appears to be recovering strongly as economic activity normalises. The policy stance in China has also turned more supportive.



Ukraine and Russia are vital to the global food supply chain. The crisis is adding pressure to already stretched global supplies, pushing prices to higher levels.




US $

We have retained our positive score due to the US dollar’s safe haven status and the increasing divergence in monetary policy between the Fed and the ECB.


UK £

The Monetary Policy Committee delivered a rate hike with surprisingly hawkish comments but the hiking cycle may be short-lived if downside risks to growth materialise.


EU €

Inflation risks in the eurozone have increased due to the rise in energy prices and slowing growth momentum. We have therefore kept our negative score.



We expect the slowdown in exports, renewed Covid-19 related lockdowns and interest rate cuts to lead to a depreciation in the renminbi (offshore).



We have retained our neutral score based on the safe haven status of the currency and the attractive valuations. A slower US interest rate cycle could also strengthen the yen.


Swiss franc ₣

In terms of safe haven currencies, we have a preference for the US dollar over the Swiss franc as we have more conviction in the Fed’s path to normalisation. Normalisation refers to interest rates being raised back to where they broadly were prior to Covid-19 and the phasing out of other monetary policies implemented during the pandemic.


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

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