It’s important to remain focused on the long term and avoid over-reacting to short-term news. Portfolios should be adjusted in
a measured way to the evolving environment."
Bill Street, Group Chief Investment Office
While the war in Ukraine, Covid-19 and Fed tightening are making the outlook more uncertain, we believe our moderate risk-on positioning remains tactically appropriate as the initial shock is now behind us. Longer term, the investment implications of a changing world are profound.
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Recent events remind us that the unexpected happens frequently. Russia’s invasion of Ukraine has shattered the peace in Europe and quickly turned into a humanitarian crisis for millions of people, with the reverberations being felt around the world. While it may seem insensitive to even mention the financial consequences, our role as financial advisors is to interpret for you how the war and sanctions are affecting the global economy and financial markets.
One side-effect of the conflict is that it has added to inflationary pressures. With inflation remaining stubbornly high, central banks are now having to tread a fine line between increasing interest rates by enough to take the heat out of the economy, but not by too much for fear of causing a sharp slowdown or even a recession. This uncertainty is making some investors nervous about the prospects for company profits and investment returns.
Investing is never easy and conditions are particularly difficult right now. The first thing to remember is that markets have recovered from previous geopolitical crises, wars, pandemics and recessions. Yet it can take time, which is why it’s important to remain invested when conditions are challenging. History shows that a portfolio strategy underpinned by exposure across a diverse range of asset classes, regions and managers is almost always the best approach.
We’ve been writing this year’s mid-year outlook at a time when global events are moving rapidly. It’s important to remain focused on the long term and avoid over-reacting to short-term news. Portfolios should be adjusted in a measured way to the evolving environment. Meanwhile, we’re also looking at long-term investment themes we think are likely to disrupt companies, sectors and the wider economy – such as the transition to renewable and reliable energy, cybersecurity, robotics and automation – which you can red more about here.
Bill Street, Group Chief Investment Officer
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