- Consensus remains cautiously positive on the economic and market outlook for the coming year, but for the first time in 18 months, we have started trimming risk in our views, advocating building dry powder to take advantage of opportunities that arise due to potential short-term market volatility.
- The immediate hurdles that investors need to clear include supply disruptions and rising input costs (particularly energy), tighter fiscal and monetary conditions, and threats to growth in China. These near-term challenges could lead to slowing growth and stubborn inflation.
- As a result, while our views remain largely consistent and oriented toward risk exposure on a 12-month horizon, we are looking to be more defensive in the short term. That raises the question: Which markets do we favor when stock market valuations are stretched and core government bond yields remain so low?
For further details see:
Asset Allocation Committee Outlook Q4 2021: Clearing The Hurdles