Asset Allocation | Portfolio Updates
Asset Allocation Update: Holding Steady Through Volatile Markets
- By Bilal Hafeez
- 3 min read
June was a brutal month for markets. Thankfully, July came to the rescue. The S&P500 bounced 9.1% (the third-strongest July on record). Equity indices across the rest of the world were no slouches (Chart 2). Bonds were bought, too; US 10Y yields fell 31.0bps, while they fell even more in Germany and the UK. Meanwhile, commodities recovered 4.0%, and crypto snapped out of its losing streak, at least for now.
What caused this? Through June, DM central banks turned up the heat – hiking interest rates aggressively – and markets thought we were heading for a recession. This harmed assets. However, in July, markets decided enough was enough. They thought the Fed had done the lion’s share of the work on inflation; they were calling for a peak in the price rises and cuts to interest rates in 2023. We disagree, but risk assets recovered, nonetheless. Central bank pricing was not the only driver, though: pessimism surrounding China appeared to have bottomed; Russian gas turned back on; and earnings could have gone far worse.
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