Multi-Asset Solutions

Supply shocks and the Russia-Ukraine War continue to further stress the global economy. Considering this, we see risks skewed to the downside and trim our global growth forecast by a full percentage point.

The current macroeconomic environment is less certain than it was at the beginning of 2022. The ongoing Russia-Ukraine War has added uncertainty as its duration as well as its impact on global growth is still unclear. Within equities, our models strongly favor the US and we continue to rotate out of non-US regions.

The macroeconomic environment is less stable than it was a month ago and the recent volatility surge driven by the Russia-Ukraine War has introduced new tail risks. Consequently, a modest de-risking of portfolios in favor of gold is preferred. Although challenged, growth is expected to remain positive and we will continue to monitor developments in Ukraine.

The current year could be characterized as a descent from the peak to an environment of lower but above-trend growth. A number of factors, including a decline in Omicron cases, should underpin economic growth and help re-normalize consumption at a time when fiscal policy is becoming less favorable. Although challenged, the macroeconomic environment should remain supportive of growth assets.

As we enter 2022, Omicron remains a concern, affecting supply chain and inflation levels. Uncertainty hovers over due to elevated inflation and a more hawkish Fed, but the durable fundamental backdrop mitigates the risks. The effect of Omicron should be short lived as well and economic growth should remain above trend. Improved risk appetite and the still positive economic outlook support a modest overweight to growth assets.

While numerous uncertainties, including the Omicron outbreak, cast a shadow on the economic growth outlook, we believe global economies exhibited resiliency as the fundamental backdrop remained sturdy. Monetary policy should remain accommodative in the near term, and the improving labor market will contribute to the growth in 2022. While some caution is reasonable, the environment is broadly supportive of growth assets.

Even as inflation and supply chain constraints weighed on global growth, the sanguine jobs report suggests easing pressure. Strong margins should mean companies will be able to maintain their pricing power, which bodes well for future growth. While some caution is justified, our positive outlook for economic growth is supportive for growth assets.

Markets have started to encounter some disturbances, including supply chain troubles, labor shortages and soaring energy prices. However, monetary policy should remain accommodative going into 2022 and global growth should continue to support corporate profits and risk assets. Overall, the economic recovery will continue, albeit at a more moderate pace, warranting some near-term caution.

Recent data prints point toward a moderation in growth, which is expected after the torrid pace of growth that we have witnessed so far. However, underlying fundamentals continue to remain firm, and positive economic growth should persist. Besides, improving leading economic indicators give reason to believe earnings will remain strong. All in all, the still favorable indicators reinforce our preference for risk assets.