Publications -

Viewpoint – January 2023

Following a bruising year for investors in 2022, markets opened 2023 in much better spirits. Nearly all the major asset classes enjoyed strong returns, with global equities up over 7% in dollar terms in January, global bonds by close to 3%, corporate and emerging market bonds outperforming governments, and gold up almost 6%. Commodities were generally more subdued, with the oil price declining by 2%, taking it 7% lower than a year earlier, a dramatic turnaround from its steep rise in the early months of 2022.

Viewpoint – November 2022

The rally in risk assets in October broadened out in November, with strong returns across nearly all major asset classes and markets. MSCI indices showed developed equity markets returned 7.0% in the month, taking the gain from the mid-October low to 15%, while the best returns came from emerging markets, up 14.8% in November, driven by an extraordinary rise in China of 30%.

Viewpoint – October 2022

After the sharp falls in September, there was some respite for investors in October, with a strong rally in equity markets. Led by the US, +8.1%, the MSCI World Index of developed markets returned 7.2% in the month, recovering all the ground lost in Q3.

Viewpoint – September 2022

The third quarter started with bond yields falling, equities in the midst of a sizeable rally, and a perception that increasing evidence of a slowdown in the US and Europe would lead to a relatively short tightening cycle and a more dovish Fed. It ended with an increasing probability of recession, yet the most hawkish Fed since the Volcker era, bond markets in disarray and equities at new lows for this cycle.

Viewpoint – August 2022

The rally in equity markets that started in mid June continued into the first half of August, taking Wall Street 17% off its June low, but was ultimately overwhelmed by the global energy crisis and extraordinary falls in bond markets through the month, reversing most of the gains of the previous two months. The biggest falls came in Europe, and most extreme was the UK, where yields on 2-year government bonds rose by 130bps, taking the yield to 3.0% at month end, the highest for 15 years. The UK 10-year yield also rose dramatically, up by 94bps to 2.8%. Eurozone bond markets fared only slightly better, with the German 2-year yield up by 93bps to 1.19% and the 10-year up 73bps to 1.54% over the month.

Viewpoint – July 2022

After a torrid six months, with global equities suffering a 20% decline and most developed world sovereign bond markets producing negative returns each month in the first half of this year, there was finally relief in July. Led by Wall Street, with the S&P 500 up over 9% in the month, the MSCI World index returned 7.9%, while the JPMorgan Global Government Bond index returned 1.9%. Riskier parts of the bond market, which had sold off heavily in the first half of the year, recovered sharply, with US investment grade bonds +3.2%, high yield bonds +5.9%, and emerging market debt +4.0%.

Viewpoint – June 2022

The sharp downturn in financial markets this year broadened and deepened in the second quarter, resulting in an exceptionally difficult six months for investors. While in Q1 there were some pockets of strength – commodities, gold, UK large-cap equities, and a small number of emerging equity markets and currencies, in the second quarter the only positive returns of note came from oil and Chinese equities. With the dollar surging throughout the period, the only safe haven to preserve capital in dollar terms was US dollar cash. Developed equities returned -16% in Q2, led by the US, and are now down by over 20% YTD.

Viewpoint – May 2022

The brutal sell-off in markets this year finally stabilised during May, although the rally was by no means uniform, and investor sentiment remained nervous in the face of intense uncertainties about inflation, growth, and the unfolding impact of the war in Ukraine. No single catalyst triggered the rally, rather a combination of factors: signs of a consumer squeeze and economic slowdown ahead, leading to a sense that inflation is nearing a peak and the Fed’s hawkish policy shift could be enough to bring it under control; improved valuations leading to some dip-buying and a short squeeze in some of the big tech stocks which have been hammered this year; a weaker dollar; and China’s support for its ailing economy and loosening of covid restrictions in major cities.

Viewpoint – April 2022

The war in Ukraine, and widespread evidence of Russia’s depravity as its advance falters, continues to cast a dark shadow over the world. With Russia’s invasion now into its third month, and both sides increasingly intransigent with no signs of a negotiated end in sight, the probability of a long, attritional war is rising. The longer the war drags on, the greater the risk of longer lasting economic damage, transmitted primarily through global energy and agricultural commodity prices. Yet in April it was deepening worries about economic imbalances, which had been developing long before the invasion, that drove financial markets – ultra-loose monetary and fiscal stimulus adding fuel to the fire of post-pandemic release of pent-up demand, triggering excess demand in supply-constrained markets, in turn leading to high and persistent inflation.

Viewpoint – March 2022

The benign conditions enjoyed by financial markets in the 18 months since the depths of the pandemic were well and truly shattered in the first quarter of 2022, driven by two powerful shocks, both largely unexpected and each with huge consequences globally: Russia’s invasion of Ukraine and the Fed’s very sharp hawkish shift in policy. The immediate consequences of the war produced surges in energy prices and further disruptions to key commodity markets and supply chains, adding to the damage inflicted by the pandemic. But away from commodities, there were few markets that could withstand the heightened risk of a significant slowdown in global growth and much higher interest rates than anticipated only a few months earlier.