Our multi-asset investment views - March 2022





Russia’s move into Ukraine added more uncertainty into the already volatile market. This is against the backdrop of many developed countries raising rates and tightening liquidity (when the availability of funds becomes less ample).


Government bonds

Given further supply disruptions caused by the geopolitical situation, we expect the trade-off between growth and inflation to continue to deteriorate, posing a challenge to central bank policy.



We remain positive on commodities due to heightened geopolitical risks and the imbalance between supply and demand.



We upgraded to neutral reflecting the widening of spreads (the difference in corporate bond yields compared to a lower risk, similar maturity government bond). We expect slight declines in spreads in Europe and emerging market investment grade credit.




The markets seem poised for the start of the quantitative tightening cycle (when central banks reduce the amount of bonds they hold) with valuations re-rating significantly. The crisis in Europe adds some uncertainty but US inflation and the quantitative tightening cycle are still the main focus.



The defensive and commodity tilts of the FTSE 100 mean that this market can likely better withstand geopolitical deterioration compared to others.



With inflation skyrocketing and sanctions on Russia seeping into the system, European equities have much more to lose in the near term.



A global recovery is crucial for this market but nevertheless it should be less affected by the situation in Europe.


Global Emerging Markets1

We downgraded to neutral despite cheap valuations. The market outlook has deteriorated with geopolitical risk in Eastern Europe, lockdowns in China, energy and food price inflation and recession risk all playing a role.

Asia ex-Japan



The increasingly stagflationary environment (where growth stagnates, but inflation is rising or remains high) globally will reduce global growth, and hence Chinese exports. This will be exacerbated by the resurgent number of Covid-19 cases.



EM Asia ex China

The Korean elections are imminent and removal of this political uncertainty should be a tailwind for the region.

Government bonds



We maintained our negative stance given the Fed is politically incentivised to contain inflation; therefore the likelihood of several rate hikes remains high.



Gilt yields have moved significantly in recent weeks although we believe there will be fewer rate rises this year than the market expects. We expect inflation to peak in April.



Given the the impact of higher energy prices on inflation in Europe, we believe the ECB will delay tightening monetary policy, leading to a steeper yield curve in Germany (where the difference between longer-dated and shorter-dated yields increases).



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 the Fed’s priority is to control inflation.


Emerging markets local currency bonds

We downgraded to negative. The economic environment has changed significantly in  emerging markets with stagflationary as well as recessionary risks mounting.


Investment grade credit



Unlike its counterpart in Europe, we think Fed policy is unlikely to support the credit market any time soon. In the absence of a catalyst to upgrade we remain neutral.



A combination of international and domestic pressure, paired with the rising rate environment, lead us to believe that the ECB will remain supportive for the near term.


Emerging markets USD

Very compelling valuations and low default rates are making EM bonds attractive despite the macro risks.


High yield bonds (non-investment grade)



We anticipate spreads may widen further where subdued price action year to date looks anomalous.



Valuations have moved a long way and fundamental momentum appears to be peaking. Earnings uncertainty is picking up and concerns about economic growth are rising.





The market has further tightened since Russia’s invasion of Ukraine with markets continuing to reflect a pronounced imbalance of supply and demand.



We remain neutral under the current environment of rising stagflationary risk, the breaking down of the inverse relation with interest rates, and peak central bank hawkishness (when central banks are more inclined to raise rates to curb inflation). The Ukraine invasion has strengthened these trends.


Industrial metals

Ex-China demand continues to rise whilst the policy stance in China has turned more supportive. The focus on renewable energy also brings substantial long-term upside.



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




US $

We upgrade the US dollar for its safe haven currency status and the increasing divergence in monetary policy between the Fed and the ECB.


UK £

The MPC delivered a rate hike with surprisingly hawkish comments, but the hiking cycle may be short-lived if downside risks to growth materialise. We keep our neutral score.


EU €

We downgraded the euro. Inflation risks in the Eurozone have increased due to the rise in energy prices and slowing growth momentum. Against this backdrop, we expect the ECB will be more dovish (gearing policy toward supporting the economy) with the ongoing conflict in the region.



We expect a slowdown in exports and interest rate cuts to lead to a depreciation in the renminbi (offshore).



We move to neutral based on the safe haven status of the currency. In addition, a slower US interest rate cycle could strengthen the yen.


Swiss franc ₣

We upgraded the Swiss franc as the currency also benefits from safe haven flows. The economy is less exposed to higher energy prices with a low reliance of fossil fuels.


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