Mid-month chart book

Since the start of 2022, the International Monetary Fund (IMF) has revised its global growth expectations down from 4.4% to 3.6% due to the Russian invasion of Ukraine, higher rates globally, and subsequent recession fears. We expect a further revision to 2% – 2.5% for global GDP growth.

Every major economic region in the world is expected to grow less, except for energy, commodity, and agriculture heavy economies like Canada, Australia, or Norway in developed markets, and Saudi Arabia, Qatar, U.A.E., and Brazil in emerging markets.

The U.S. dollar has acted as a safe-haven currency, while the war in Europe and Japan‘s loose monetary policy has kept the euro and yen weak.

We remain underweight international developed markets. Europe is in a prolonged energy crisis and has limited options in monetary policy, given the tough choice between tackling inflation or stabilizing the peripheral countries like Italy and Greece.

We also remain underweight emerging market assets with China’s zero-covid policy limiting growth rates in Asia, and vulnerable emerging market economies facing stress due to higher global interest rates and inflation.

On the margin, the Chinese private enterprise’s friendly policy shifts are promising. We are closely analyzing these pivots, but our view will not change until a meaningful adjustment in direction appears in the corporate earnings outlook.

Emerging market bonds, especially dollar-denominated, offer attractive entry-level yields for high-risk portfolios, but we are waiting for a higher margin of safety as risks build up in vulnerable economies like Argentina and Turkey.