4 min read 18 Jul 22
Looking ahead, we believe financial markets are likely to remain volatile as financial conditions continue to tighten and economic growth weakens. The inflation outlook remains uncertain and as such central banks are inclined to raise interest rates more quickly than in prior cycles. Market pricing of rates and inflation suggest an expectation that the Federal Reserve will follow through with its intentions to raise interest rates over the coming months but at a cost of a contraction of output. The risk for equities and bonds heading into H2 is that the expected slowdown in inflation fails to materialise while the economy continues to slow. The economic side effects of the continuing war in Ukraine on energy and commodity markets as well as the scars on supply chains left by COVID-19 provide additional complexity.
Relative to the strategic asset allocation for each portfolio, we are taking the following views:
We are neutral on equities overall. In our view, it is still too soon to position for a rebound in risk assets, as there are some risks that have not been fully priced in. We continue to monitor market moves carefully and will adjust our allocations as the economic outlook changes.
Issued by M&G Wealth Investments LLP, which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales with company number OC305442. Registered office: 10 Fenchurch Avenue, London EC3M 5AG.
M&G Wealth Investments LLP is a subsidiary of M&G plc, incorporated and registered in England and Wales. Registered office: 10 Fenchurch Avenue, London EC3M 5AG. Registered number 11444019. M&G plc is a holding company, some of whose subsidiaries are authorised and regulated, as applicable, by the Prudential Regulation Authority and the Financial Conduct Authority.