Monthly Coffee Break

Asset Allocation, Monthly Coffee Break

Could fiscal aid mitigate the impact of the energy crisis on European equities?

While inflation continues to surprise to the upside, growth dynamics have turned and continue to decelerate. Growth concerns are mainly affecting Europe, as energy prices remain an important inflation driver, while central banks are stepping up their tightening. The negative impact of the energy crisis could be mitigated, as countries are stepping up fiscal aid. Overall, we expect stronger downwards profit revisions in Europe than in the US, as the European equity market is more pro-cyclical, and we confirm our underweight stance on EMU equities. We also maintain a preference for US duration exposure over European, within an overall neutral portfolio duration.
Fixed Income, Monthly Coffee Break

Negative performance across the board

After a respite in July, August saw negative performances across the board for almost all asset classes. In G10 rates, investors in Japan suffered the least (-0.97%), whilst the UK posted the largest losses (-6.36%), followed by EMU peripherals at –5.34%. EMU core markets fared somewhat better at -4.71%, but with a sizeable distance away from US government bonds at -2.73%. Breakevens were positive across the board, although barely so in the eurozone.
Absolute Return, Monthly Coffee Break

Nobody wants to fight the Fed

After a two-month period of improving risk appetite, the market started to head downwards in mid-August, influenced by the outcome of the Jackson Hole meeting. Jerome Powell’s hawkish tone obviously had a strong impact on the markets, but it was not the only strong driver. The deterioration of energy supply in Europe as we are quickly approaching winter is a cause for concern for industrial output, but also consumers, who will be facing record energy bills.
Equities, Monthly Coffee Break

The second half of the year looks challenging

Central banks’ commitment to bringing inflation under control, despite the inherent risks to the growth outlook, shook both equity and bond markets in August. While the summer brought historical droughts and heatwaves to many parts of the world, the global economy nevertheless continued to cool. All in all, the level of uncertainty about the outlook for the global economy remains high. This uncertainty is especially elevated in Europe, where after six months of war in Ukraine, there is no sign of a ceasefire, and where a recession seems increasingly likely this winter as the region’s energy crisis continues to intensify.
Asset Allocation, Monthly Coffee Break

Caution, hot

This year’s European summer heatwave and drought has the potential to worsen the current energy crisis, as river water levels have dropped significantly.
Absolute Return, Monthly Coffee Break

The year of the bear

As the investment community was slowly preparing for a well-deserved summer break, a higher-than-expected US CPI read revived fears that a recession might be around the corner. Uncontrolled inflation is pushing central bankers to continue raising the cost of capital, as the Fed did at its June meeting.
Absolute Return, Monthly Coffee Break

Drawing a line in the sand

Markets remain nervous, as investors perceive the Fed as being behind the curve in taking control over inflation. Rising prices are biting into consumer sentiment and savings, leading to decreasing growth expectations.
Equities, Monthly Coffee Break

EQUITIES: Global markets stabilised somewhat in May

Global equity markets stabilised somewhat in May after the significant correction since the beginning of the year. However, there are not a lot of new elements to digest. The Fed walked the talk and increased its rates.
Fixed Income, Monthly Coffee Break

Geopolitical tensions continue to weigh on investor sentiment

The performance of financial markets improved in May, with US markets posting a positive performance for the first time this year. Equities rebounded from their lows of May 19th and the greenback weakened while EUR/USD rebounded towards 1.07.
Asset Allocation, Monthly Coffee Break

Prepare for landing

The multiple shocks experienced so far in 2022 have led to a rare simultaneous decline in equity and bond values. As uncomfortably high inflation leads major central banks to tighten monetary policies, investors are preparing for the landing of the global economy.
Asset Allocation, Monthly Coffee Break

Tightening into the slowdown

The reasons for a prudent allocation have not changed in recent weeks: facing high inflation, central bank rhetoric and policy tools have triggered a tightening in financial conditions while the global economic slowdown is now well underway, as the war in Ukraine and Covid-related lockdowns in China weigh on confidence and activity.
Monthly Coffee Break, Absolute Return

Brace for impact

There are currently so many headwinds to the economy that it is difficult to isolate THE driver that is having the biggest impact on deteriorating economic fundamentals in only a small paragraph.
Fixed Income, Monthly Coffee Break

High volatility

The performance of the fixed income asset class was impacted by geopolitics, the rise in inflation and the generally hawkish stance of central banks.
Asset Allocation, Monthly Coffee Break

Accelerating towards the cycle end

Exiting the pandemic, entering the war and tightening monetary policies around the globe are acting together as a formidable business cycle accelerator.
Absolute Return, Monthly Coffee Break

Changing volatility regimes

The global economic outlook is foggy, and the start of the year has kept on adding additional layers of complexity.
Equities, Monthly Coffee Break

Supply-chain interruptions risk due to Ukraine

At the beginning of 2022, economic activity returned to its pre-pandemic level and the omicron wave had less of an impact on activity than previous ones.
Fixed Income, Monthly Coffee Break

Strong increase in volatility

Markets moved into a risk-off mode as a result of the ongoing geopolitical turmoil that culminated in Russia’s assault and invasion of Ukraine
Asset Allocation, Monthly Coffee Break

Time is of the essence

The war in Ukraine has added new uncertainties for investors
Equities, Monthly Coffee Break

Uncertainty remains

For the second month in a row, global equity markets suffered. In the first half of February, investors were mainly focused on the pace of rate increases in the US and Europe.

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