Asset Allocation Video – Downside Risks to Earnings, Especially in Europe

2 AUTHORS Invest

05/05/2022 1 min read

Persistent inflation expectations leading to a tightening of central bank monetary policy should continue to weigh on bond markets. In our view, the possibility of further increases in real yields and term premia justifies a significant underweight in bonds. On the equity side, corporate earnings (ex-energy) were better than expected, but a less rosy outlook argues for limited risk exposure.

Watch our video with Multi-Asset Head Maya Bhandari and Chief Market Strategist Daniel Morris as they discuss topics including Covid-related developments in China and the – favorable – outlook for commodities. When it comes to European equities, they agree that the asset class looks expensive and that inflation, growth and supply chain pressures are with no end in sight.

WARNING

All opinions expressed herein are those of the author as of the date of publication, are based on available information and are subject to change without notice. Individual portfolio management teams may have different views and make different investment decisions for different clients. The opinions expressed in this podcast do not constitute investment advice.

The value of investments and the income from them can go down as well as up and investors may not get back their initial investment. Past performance does not guarantee future returns.

Investing in emerging markets, or in specialized or restricted sectors is likely to be subject to above average volatility due to a high degree of concentration, greater uncertainty as less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of developed international markets. For this reason, portfolio transaction, liquidation and custody services on behalf of funds investing in emerging markets may involve greater risk.

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