Whatever it takes, in reverse

In Short

Summer of discontent. 2022 was always going to be a difficult year. Our 2022 Outlook, “Bye-bye beta” presented a difficult case for asset performance this year. Our Q2 Investment Views, “Mission impossible”, laid out the daunting task of monetary policy makers: crushing inflation without causing a hard landing.

Highlights:

  • Central banks are on a mission to fight the inflation beast – whatever it takes, even a recession. The financial mood will remain gloomy this summer as economic data deteriorates while central banks walk their hawkish talk. 
  • We expect the Fed to turn less aggressive this autumn, as it faces a deterioration of the economy and, eventually, employment data. Inflation headlines will also cool off by then, and more so in Q1. 
  • But for now, central banks (CBs) are left lamenting about second-round effects. The ‘wishful-thinking’ approach to policy (inconsistent ECB and Fed forecasts) have also delayed the market reckoning about the economic pain. We also question the ECB’s political and legal capacity to reallocate its huge balance sheet as it tries to lean against fragmentation.
  • We stick to our guns, with an underweight in equities and an overweight in high-quality credit. Increase cash over summer, whilst reducing the shorts in both core Govies and duration.
     

Read the full publication below

Investment View I Whatever it takes, in reverse
Picture

© Generali Investments, all rights reserved. This website is provided by Generali Investments and is considered as a marketing communication and financial promotion related to the products and services of the following companies belonging to the Generali group: Generali Asset Management S.p.A. Società di gestione del risparmio and Generali Investments Luxembourg S.A. (hereinafter jointly, Generali Investments). Moreover, the website may contain marketing communication and financial promotion of products and services of companies part of the multi-boutique platform coordinated by Generali Asset Management S.p.A. Società di gestione del risparmio and in particular of Infranity, Sycomore Asset Management, Aperture Investors LLC., Plenisfer Investments SGR, Lumyna Investments, Sosteneo Infrastructure Partners SGR and Generali Real Estate S.p.A. Società di Gestione del Risparmio