Climbing a wall of worries? It is very slippery

In Short

Just as central banks keep rushing to tame the inflation beast, the energy crisis and political uncertainties are complicating their tasks even further. Yet both Equities and Bonds climbed a wall of worries in July.

Highlights:

  • Central banks (CBs) are still showing their teeth, frontloading rate hikes and asserting their  inflation credentials. But the Fed and ECB’s distancing from forward guidance is likely coinciding with a pivot towards less aggressive tightening.
  • Indeed, risks to growth are rising steadily. A moderate H2 recession is now our base case for the euro area. This will strengthen the case for a more calibrated monetary tightening after summer.
  • Also expect the Fed to turn less hawkish by then. Investors may be front running this already, hence the recent bounce in equities. Yet we keep a prudent risk stance for now, in a fast deteriorating economic environment: underweight Equities, HY Credit and non-core debt (TPI unconvincing). We see value in safer Credit segments and USD.
     

Read the full publication below

Climbing a wall of worries? It is very slippery
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 Investments Partners S.p.A. Società di gestione del risparmio, Generali Insurance Asset Management S.p.A. Società di gestione del risparmio, Generali Investments Luxembourg S.A. and Generali Investments Holding S.p.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 Investments Partners 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, Axis Retail Partners S.p.A. and Generali Real Estate S.p.A. Società di Gestione del Risparmio