The Fed has left the party

In Short

It is hard to keep a party going when the music is switched off abruptly. Many investors headed for the exit as the Fed signalled a much sharper pivot towards policy normalisation in January.

Highlights:

  • Fed tightening will start in March. They promise to be nimble, not gradual, i.e. less predictable, more data-dependant, and possibly faster.
  • We still expect the unfinished global recovery and decent earnings growth to lend support to risk assets. Yet two key risks are materialising: a tougher Fed and rising energy prices. We scaled back our Equity overweight (OW).
  • In FI we retain an OW in Credit given residual ECB support and resilient fundamentals; we stay UW long-dated Govies. Both positions are paying off.
  • The USD still has legs on Fed support, but we expect a reversal of fortune later this year.

Download the full publication below

The Fed has left the party
Picture

© Generali Investments, all rights reserved. This website is provided by Generali Investments Holding S.p.A. as the holding company of the main asset management companies of the Generali Group having, directly or indirectly, the majority shareholding in the companies listed below (hereinafter jointly, “Generali Investments”). This website may contain information related to the activity of the following companies: Generali Asset Management S.p.A. Società di gestione del risparmio, Infranity, Sycomore Asset Management, Aperture Investors LLC (including Aperture Investors UK Ltd), Plenisfer Investments S.p.A. Società di gestione del risparmio, Lumyna Investments Limited, Sosteneo S.p.A. Società di gestione del risparmio, Generali Real Estate S.p.A. Società di gestione del risparmio, Conning* and among its subsidiaries Global Evolution Asset Management A/S - including Global Evolution USA, LLC and Global Evolution Fund Management Singapore Pte. Ltd - Octagon Credit Investors, LLC, Pearlmark Real Estate, LLC as well as Generali Investments CEE. *Includes Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. (collectively, “Conning”).