INVESTMENT UPDATE & OUTLOOK QUARTER 3, 2022
October 2022Q3 2022 was another tough and volatile quarter for global financial markets with declines across most asset classes. Investors grew gradually more concerned about an imminent recession due to central banks reaffirming their commitment to fighting inflation by raising interest rates (Fed, ECB, and BoE all hiked during the quarter), slow growth, the energy crisis that primarily had impacted Europe, and financial system stress such as the leverage crisis for defined benefit pension schemes in the UK. Therefore, key leading indicators such as the purchasing managers’ indices and consumer sentiment surveys have continued to deteriorate globally. Except for a short rally in July on hopes that the Fed would start cutting rates in 2023, the major equity indices posted negative returns over the period as the hawkish tone from global central banks increased and the overall macroeconomic environment weakened. Global fixed income markets also performed poorly as yields in most developed and emerging market countries reached their highest level since the global financial crisis with Gilts among the worst impacted (-14.0%) given the market turmoil in the UK. Against this backdrop, diversified multi-asset portfolios have experienced another difficult quarter as the traditional low correlation relationship between equities and bonds broke down during the period.
