Webinar: China and energy markets shine a light in challenging times
Global equities and bonds have seen the worst combined quarterly performance in over 30 years. But, China promises good news amidst a challenging economic backdrop.
• Higher inflation and recession risks are likely to weigh on sentiment in the second half of 2022. Global growth is expected to slow to 2.7% in 2022, followed by a repeat performance in 2023
• Earnings forecasts made earlier in the year now appear optimistic. Downgrades to earnings for this year and next are a risk to performance over the next six months
• Earnings upgrades in the energy sector are the exception rather than the rule
• Weak consumer sentiment and falling markets may impact spending. Data shows that household wealth has reduced
• The US labour market remains in relatively good health. But, historically, we have not seen a recession without a spike in jobless claims. We are looking closely at participation rates as many people left the jobs market during the pandemic and haven’t come back in
• UK inflation is likely to remain elevated in the near term. Energy price caps may push out peak inflation. The risk of recession in the UK is greater than it is in the US, partly due to its proximity to Russia and Ukraine
• Global equities and bonds have seen the worst combined quarterly performance in over 30 years. Equity markets are clearly pricing in slowing economic activity. We are focusing on higher-quality equities that have historically outperformed during economic slowdowns
• 2022 has shown that government bonds don’t always protect portfolios. We believe alternatives offer better diversification in the current environment. Our alternative assets have performed well this year relative to equities and bonds
• China offers a good news story as it eases Covid restrictions. Travellers are now only required to isolate for ten days, down from 21 – the biggest shift from its stringent lockdown regulations seen so far. This led to a doubling in train and plane ticket bookings.
Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.