Investors’ view of some of the key global economies – US, UK and Europe continues to be reassessed. This is against a backdrop where real interest rates (interest rates minus inflation) are at a high not seen since the great financial crisis of 2008/09.
The US continues to prove resilient and recession expectations are diminishing. Europe is slowing down faster than anticipated and we expect GDP growth to reflect this with the largest countries – including France and Germany all skirting close to recession. Here in the UK, higher interest rates have led to GDP growth stalling and with signs that unemployment is rising and house prices falling.
We have previously commented on how challenging the economic conditions and the subsequent uncertainty of when recovery will happen. Our approach here is to set the strategic asset allocation and find fund managers that can deliver over the medium to longer term.
In the short term, macro headwinds will continue to drive market and investor sentiment, but we are seeing some bright spots appearing.
Our view on Bonds is more positive than at any time over the last decade and even if inflation lingers or interest rates stay higher for longer, Bonds are priced to generate a positive total return.
Equities generally have remained challenged in reaction to higher inflation and higher interest rates but those demonstrating strong fundamentals, cashflow and growth prospects have and will continue to hold up better.
Finally, a reminder that you are eligible to subscribe £20,000 into an ISA each year. If you can, we recommend you use it, otherwise you will lose it. Please feel free to contact us to discuss.
To discuss your investment options with one of our wealth managers you can contact us here for a free consultation.