Rough ride in the final lap
Heightened volatility prompts a cautious stance on risk assets and an overweight call on cash, which provides dry powder for emerging opportunities
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AS we enter the final lap of 2022, investors continue to steer the twists and turns of unprecedented volatility this year. No asset class has been unscathed: US equities are down by over 25 per cent year to date; bond prices are hit by the highest US Treasury volatility in 15 years; and the headwinds of the USD are at multi-decade highs.
Volatility, which took pole position in driving markets so far, will likely finish the year in the lead. How can we steer portfolios amidst the market conditions buffeted by three key trends – inflation versus recession; heightened geopolitical shifts; and worries over energy security.
Macro dilemma: inflation intolerance
Global central banks, whose key mandates are to maintain price stability, are taking extraordinary measures. Over 85 per cent of the 38 central banks monitored by the Bank of International Settlements (BIS) have raised interest rates this year.
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