26 Jul 2022
20 min read

A Double-edged Sword - Q3 2022

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A Double-edged Sword

We’re excited to introduce our new quarterly Investment Outlook publication. We devote our first issue to cross-cutting factors in the current economic environment. Despite widespread anticipation of recession, businesses show no signs of defensiveness, consumer spending remains strong and labor demand remains high. The possibility remains that the Fed may have to raise interest rates further to bring inflation under control. 

Additional highlights

  • Pension Solutions Monitor: We estimate that pension funding ratios decreased over the second quarter of 2022, with the average funding ratio decreasing from 96.3 percent to 94.0 percent during this timeframe.
  • Fixed Income: We argue that it is premature to get outright constructive on credit as global central banks continue their sprint towards neutral, and in some cases, restrictive policy rates at the expense of growth.
  • Equities: Without a higher risk of a severe recession, we view current markets as already quite bearish, and, accordingly, have reduced short positions in some risk markets and taken a very tactical long position in US equity.
  • Rates: With rates currently sitting around 30 basis points below the post-COVID highs from June and no sign of inflation abating, we remain bearish on rates and expect them to move higher from these levels.

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Read our thoughts and reflections with regards to the financial markets as well as timely topics by downloading our latest newsletter. 
 

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