Investment Outlook Short Version September 2022


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Markets are showing remarkable denial about central banks around the world, and investors are still convinced that the Fed and the ECB will change their current course as soon as the economy deteriorates and financial markets fall. Recent press conferences by Fed Chair Jerome Powell and ECB President Christine Lagarde could not have been clearer: central banks will do whatever it takes to maintain price stability. We expect inflation in Europe to peak slowly but surely, but to miss the 2% target for some time yet. This of course has implications for all areas of the financial market.


While the economic situation in the USA is rapidly deteriorating, the situation in the rest of the world is even bleaker. As Europe is sliding into an energy crisis, the economy in China is developing sluggishly, and even the government's half-hearted stimulus packages do not seem to be changing the looming real estate crisis. Both the worsening situation in developed countries and the problems in China (which can quickly spill over to the rest of Asia) are extremely negative indicators for developing countries. As we expect a more intense slowdown in Europe compared to the US, we still prefer the US market within equities.

Fixed Income

We recommend going short duration and allocating to government bonds. In our opinion, interest rates should rise sharply as soon as the market accepts that central banks will not change course. Credit spreads are slowly but surely becoming unattractive again, so we will probably downgrade our house view here soon.


The crude oil price appears unreasonably low in view of the tight supply. The EU ban on Russian oil imports starting in December will reduce supply by about 2 million barrels per day. US inventories are very low, the US government used up about 17% of its strategic reserve last year, and OPEC reserve capacity has shrunk significantly. Weaker energy demand will have some negative impact, but we expect Brent crude oil to rise above $110 by year-end (from $92 currently). While the long-term outlook for metals needed for the energy transition (especially copper) remains attractive, prices could fall further due to slumping Chinese demand.

Foreign Exchange

The dollar has continued to strengthen, driven by stronger growth, higher inflation and faster rate hikes in the US compared to the rest of the world. However, with the USD looking very overvalued, there is a risk that the ECB and other developed country central banks could limit dollar strength with their tighter measures. However, we still expect another window in which the dollar will appreciate, so we remain fundamentally overweight here.

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