6 April 2022
Just as we were looking to return to some semblance of post-pandemic normalcy, the Ukraine conflict and resulting geopolitical stress have further complicated the macro landscape. The extended disruption to global supply chains and surge in commodity prices mean that major central banks now face the near impossible task of tamping down inflation without squeezing real incomes or dampening growth. While we believe that policymakers' concerns over high inflation will ultimately give way to worries about slower growth and that a dovish pivot will likely materialise in Q3, the path there isn't likely to be smooth.
Cross-asset volatility remains elevated: our composite measure of risk aversion indicates a difficult quarter ahead for risk assets. A declining global liquidity impulse is most relevant to emerging-market (EM) growth and earnings, but it also has broader relevance to risk assets.
We think it’s extremely likely that the next global stimulus phase will represent a significant departure from the playbook that investors have been conditioned to seeing since the global financial crisis. Indeed, we’re already seeing revolutionary shifts in the opposite direction. Significant increases in defence spending are being adopted by governments across the world. Meanwhile, many Western banks and businesses are engaging in self-sanctioning, opting to avoid unsanctioned Russian entities out of fear that the official sanctions list might broaden later.
These are profound changes, developments that have significantly accelerated the pace of progress toward an even more fragmented global economy. In fairness, this movement was already in place before the pandemic but has been catalysed by Russia’s invasion of Ukraine. Military conflicts change everything. As politics change, economics will too, and financial markets—as history informs us—will follow.
The strategic investment implications from this macro thesis remain a portfolio biased toward up-in-quality assets, U.S. equities and fixed income over other developed markets, and EM with less room or willingness to monetise deficits (e.g., the eurozone and China). Similarly, the thesis would favour the USD over high-beta fiat currency.
To learn more about the macroeconomic themes for North America, Europe, Asia-Pacific and Latin America, download the full version.
Takeaways from China’s NPC Meeting & upcoming drivers for Greater China equity market
In addition to the recent breakthroughs in AI and humanoid robot development, we observe other positive catalysts that further support the region’s market.
Five macroeconomic themes for 2025: a global economy in transition
2025 is shaping up to be a year of transition. With that in mind, we explore five key forces that we believe will drive the global economy and markets this year. Return to this page periodically for additional timely insight and resources to help guide you through 2025.
2025 Outlook Series: Asia Fixed Income
As rate paths shift and market volatility is expected to increase across global rates, credit, and currency markets, we explain why the sub-asset classes within the Asian fixed income space (Asia high yield, Asia investment grade, and Asia local currency) could provide shelter with opportunities.
2025 Outlook Series: Global Healthcare Equities
The Global Healthcare team maintains a sense of measured optimism for the performance of healthcare equities given the underlying key subsector strength in 2025.
2025 Outlook Series: Global Semiconductors
From an investment perspective, we believe a diverse, global portfolio of high conviction, quality companies in these target industries offers an attractive, long-term risk-return profile underpinned by robust fundamentals, significant tailwinds, structural demand growth and earnings visibility.
2025 Outlook Series: Asia Fixed Income
As rate paths shift and market volatility is expected to increase across global rates, credit, and currency markets, we explain why the sub-asset classes within the Asian fixed income space (Asia high yield, Asia investment grade, and Asia local currency) could provide shelter with opportunities.
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