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Viewpoint – June 2022

The sharp downturn in financial markets this year broadened and deepened in the second quarter, resulting in an exceptionally difficult six months for investors. While in Q1 there were some pockets of strength – commodities, gold, UK large-cap equities, and a small number of emerging equity markets and currencies, in the second quarter the only positive returns of note came from oil and Chinese equities. With the dollar surging throughout the period, the only safe haven to preserve capital in dollar terms was US dollar cash. Developed equities returned -16% in Q2, led by the US, and are now down by over 20% YTD.

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Viewpoint – May 2022

The brutal sell-off in markets this year finally stabilised Performance of major markets 2022 to date (local currency terms) during May, although the rally was by no means uniform, and investor sentiment remained nervous in the face of intense uncertainties about inflation, growth, and the unfolding impact of the war in Ukraine. No single catalyst triggered the rally, rather a combination of factors: signs of a consumer squeeze and economic slowdown ahead, leading to a sense that inflation is nearing a peak and the Fed’s hawkish policy shift could be enough to bring it under control; improved valuations leading to some dip-buying and a short squeeze in some of the big tech stocks which have been hammered this year; a weaker dollar; and China’s support for its ailing economy and loosening of covid restrictions in major cities.

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Viewpoint – April 2022

The war in Ukraine, and widespread evidence of Russia’s depravity as its advance falters, continues to cast a dark shadow over the world. With Russia’s invasion now into its third month, and both sides increasingly intransigent with no signs of a negotiated end in sight, the probability of a long, attritional war is rising. The longer the war drags on, the greater the risk of longer lasting economic damage, transmitted primarily through global energy and agricultural commodity prices. Yet in April it was deepening worries about economic imbalances, which had been developing long before the invasion, that drove financial markets – ultra-loose monetary and fiscal stimulus adding fuel to the fire of post-pandemic release of pent-up demand, triggering excess demand in supply-constrained markets, in turn leading to high and persistent inflation. War in Ukraine has exacerbated these imbalances by driving commodity prices higher, and, in damaging consumer and business confidence, especially in Europe, it has created even greater challenges for central banks as they begin the process of attempting to unwind excessive policy stimulus without triggering recession

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Viewpoint – March 2022

The benign conditions enjoyed by financial markets in the 18 months since the depths of the pandemic were well and truly shattered in the first quarter of 2022, driven by two powerful shocks, both largely unexpected and each with huge consequences globally: Russia’s invasion of Ukraine and the Fed’s very sharp hawkish shift in policy. The immediate consequences of the war produced surges in energy prices and further disruptions to key commodity markets and supply chains, adding to the damage inflicted by the pandemic. But away from commodities, there were few markets that could withstand the heightened risk of a significant slowdown in global growth and much higher interest rates than anticipated only a few months earlier.

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Viewpoint – February 2022

“There are decades where nothing happens; and there are weeks where decades happen.” – Lenin

The quote is attributed to Lenin shortly before the Russian revolution. The week which started on February 24th, when Russia invaded Ukraine, is one of those weeks. Russia’s aggression and the unfolding humanitarian disaster have shaken the West to its core. The self-indulgent complacency spanning three decades since the fall of the Berlin Wall and the break-up of the Soviet Union has hit the brick wall of an existential threat to the liberal order of the democratic free World.

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Viewpoint – January 2022

Markets suffered a severe jolt in the early weeks of the new year. Bond yields rose sharply, and Wall Street suffered its steepest drop since the pandemic crash of March 2020. The S&P 500 fell by close to 10% from its all-time high recorded on 3rd January before a late rally reduced the loss for the month to 5.2%.

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Viewpoint – December 2021

Two years ago, news began to emerge of a cluster of pneumonia type sickness in China, soon to be identified as a novel coronavirus. In early January 2020 the WHO reported no evidence of significant human-to-human transmission. Within days it became clear that China saw things very differently, when it forced the 11 million people of Wuhan into a strict lockdown. The rest is history, but few of us then anticipated that as we entered 2022 the pandemic would still be raging, at record case numbers globally of over two million per day. Even fewer would have predicted that in those ensuing two years global equity markets, as measured by the MSCI World index, would return over 40%.

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Viewpoint – November 2021

The buoyant markets of October continued through most of November, taking several equity indices to new all-time highs, until news of the new Covid variant, Omicron, at the end of the month reverberated globally and sent equity markets into their sharpest one-day falls of 2021, pushing all major markets into negative territory for the month.

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Viewpoint – April 2021

The pandemic continued to dominate discourse in April as case numbers globally reached record daily levels, but the impact became increasingly differentiated between the developed world, where the vaccine roll-out is bringing herd immunity and the end of lockdowns and movement restrictions into sight, and developing nations, notably India and Brazil, where second waves have spread rapidly with devastating effect and vaccine roll-out is trailing badly. However, the global dominance in both GDP and stock market capitalisation of the developed world together with China, which was the earliest economy to rebound from the pandemic, has underpinned growing confidence in recovery and the prospects for equity markets.

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Viewpoint – September 2020

The pattern of market performance since the March lows continued unabated in August: global equities strong, led by the US and within that tech stocks; high yield bonds, emerging market debt and convertible bonds outperforming safe haven government bonds; inflation protected bonds performing well; precious metals strong; and the dollar weak. The S&P 500, with a 7% rise, reached new all-time highs, dragging the MSCI World index to a new high, despite many of its other constituents remaining well below previous peaks. Within markets, tech stocks and other winners from the pandemic continued to forge ahead, the NASDAQ index rising 10% to new highs, while sectors most exposed to the damages wrought by Covid, including financials, real estate and leisure, continued to suffer.

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