Third Quarter 2022
Taming inflation at all costs
At the start of the year, we argued for a firmer global economy amid global Covid re-openings. A rebound in inflation after a decade of disinflation was not necessarily a bad thing, especially as most of the inflation numbers were driven by supply chain issues that should improve over a short period of time.
But then inflation started to run too high and broadened to more sectors, threatening to become persistent. Now central bankers have run out of time to see if supply chain bottlenecks can improve. They need to tame inflation before it becomes entrenched into long term expectations.
Against this backdrop, we need to stay cautious in the near term. However, we recognise that longer-term opportunities are forming. Given that markets are likely to remain volatile in the coming quarter, we are underweight both equities and fixed income and overweight alternatives, commodities and cash.
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