Rising markets despite low growth rates and high inflation
Macroeconomic update for April 2022
The war in Ukraine is a burden for the markets – but so is the tight policy of the Central Banks and
China's strict Corona measures. What impact is all this having on various regions of the world?
How we position ourselves strategically: The monthly CIO-update analyzes the current market environment and clarifies the backstories. Dan Scott, Head Multi Asset and Mario Montagnani, Senior Investment Strategist are the presenters.
Why the eurozone in particular is cause for concern
Recently markets have been rising – despite economic growth losing some impetus. At the same time, there are increased stress factors: in addition to the war in Ukraine and interest rate hikes in the USA, now there are also strict Corona measures in China.
We currently see the eurozone, which is heavily dependent on Russian commodity imports, as a particular cause for concern. On the flip side of the coin is the USA, with a very robust labor market but fighting an uphill battle against high inflation rates.
We have three scenarios for the coming months:
- In the first half-year 2022, we expect weaker growth which could then start strengthening in the second half-year.
- In the case of inflation, we expect the high point in Q2, though it will probably remain above the target level of the Central Banks.
- The high prices will probably mean that the Central Banks will stay on their more restrictive policy course.
This has led us to make some changes in our allocation. We consider the market risk currently as being neutral and are underweight in eurozone equities. We have upgraded high quality corporate bonds to slightly negative.
