House Views - April 2022: Standing by our prudent strategy

STANDING BY OUR PRUDENT STRATEGY

Uncertainty still surrounds the Ukraine war and its economic fallout. The world's major economies went into the current crisis with fairly sound fundamentals, positive growth and low unemployment. Several were still enjoying the boost from withdrawing social distancing measures introduced to counter the pandemic. If the shock of the war proves temporary, particularly as regards disruption to energy and food supplies, developed economies can expect growth to slow but remain positive. The healthy starting position and support packages announced by various governments should help limit the negative impact of the shock. However, risks to this scenario are high and largely on the downside. Besides impacting growth, the war will tend to drive up already high levels of inflation. Central banks will speed up their normalisation of monetary policy while keeping a close eye on the economic and geopolitical environment.

 We are standing by our prudent policy on allocation, having cut risk exposure twice in the run-up to the conflict. We remain Neutral on equity markets and retain our Overweight to Hedge funds and gold - both attractive alternatives in uncertain times. Also, the prospect of further upside risks to inflation leads us to maintain our Strong Underweight to bond markets.

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