Webinar: Market update and economic outlook

•  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.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Registered Office at 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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James Brennan

James Brennan

Portfolio Director