We remain negative on equities as, while prices have fallen, we expect corporate earnings to deteriorate further given recession risks.
We have yet to see evidence of an easing in the labor market, which would allow the US Federal Reserve (Fed) to ease its stance on interest rates, so we maintain our neutral rating.
Although demand is slowing, supply-side factors are supporting commodities, especially in the energy and agriculture sectors.
Although the outlook for credit is improving, we need to see more stability in spreads and yields before turning positive.
The region is facing higher rates and overly optimistic earnings expectations, so we have downgraded our view.
Following the government’s mini-budget, the subsequent about-face and the volatility of the pound, we maintain our negative position.
Although valuations now look attractive, we believe the challenges posed by the energy crisis, rising inflation and the war in Ukraine warrant a downgrade.
Although we maintain a negative view, we recognize that a cheap yen and attractive valuations could provide medium-term support for the market, especially relative to others in the region.
Although valuations have become increasingly attractive, emerging market outperformance tends to coincide with a bright global macro picture. Therefore, given the risks of a global recession, we prefer to stay on the sidelines for now.
We remain negative as the focus shifts to the quinquennial assembly of the Chinese Communist Party Congress and await any updates on zero-Covid and other policies.
Semiconductor prices fell as supply chain disruptions eased. However, with the continued destocking of excess inventory, this trend could weigh on performance.
Based on our fair value models, US 10-year bond valuations now look attractive. However, we remain neutral as long as monetary policy is focused on fighting inflation.
There have been significant movements in the gilt market due to conflicts between government policy and central bank policy. This will likely prompt the BoE’s Monetary Policy Committee (MPC) to raise interest rates even further.
We think the market is still underestimating the willingness of the European Central Bank (ECB) to raise interest rates more than expected as inflation continues to climb.
Yields remain unattractive compared to other markets. Slowing global growth also remains a risk.
We kept our neutral score. With real US 10-year yields above 1%, we believe inflation expectations are now more realistic.
Although Latin America is showing signs of peaking inflation, our outlook for Central and Eastern Europe, the Middle East and Africa remains negative.
Investment grade credit
We maintain our positive position as valuations are attractive. Although companies look fundamentally sound, we remain cautious about our investments until we see the impact of upcoming rate hikes.
Our score remains positive because the level of spreads (the difference between quoted yields on two different investments, usually of different credit quality but similar maturities) allows investors to earn a reasonable return. Tax intervention and gas price moderation also improve the case for the European GI.
Although emerging markets have struggled with dollar strength, geopolitical tensions have already factored in and we remain positive on valuations.
High yield bonds (non-investment grade)
We remain positive as US HY has seen penalizing outflows combined with weaker issuance (supply), which is supporting valuations.
Our view remains neutral as sensitivity to European interest rates does not seem to be a concern at the moment.
We maintain our positive score as the collapse in demand was as severe as expected. OPEC is also trying to cut production quotas to support oil prices.
Although gold has held up in the current economic climate, it is less attractive relative to current cash yields. Therefore, we remain neutral for now.
We remain neutral given the current growth risks.
We maintain our positive stance given very tight supplies and low inventory levels.
We remain neutral, noting that the dollar can be used to limit risk when sentiment is negative, but is likely to weaken once it appears that rate hikes have sufficiently slowed inflation and inflation. US economy to allow the Fed to stop its upward cycle.
We have downgraded to negative as we believe the BoE MPC could disappoint on rate hikes given the very high level of inflation in the UK.
We remain neutral as we expect Euro volatility to ease as concerns over energy supply in Europe ease.
We have moved back to neutral as our view on the business cycle has now largely materialized.
We remain negative because although billions are being spent in Japan to defend the currency, the fall in the value of the yen is unlikely to stop if other central banks continue to hike rates.
We maintain our neutral position as we expect the SNB to disappoint on rate hikes, which will suppress the franc.
1 Global emerging markets include Central and Eastern Europe, Latin America and Asia.