2022 has been a year of heightened yield volatility and disappointing price action in stocks. At the end of Q2, U.S. equities had tumbled more than 20% off their peak and entered a bear market.
We ascribe this volatility to two major factors: a more aggressive Fed policy response to inflation, and related concerns about recession. Stubborn inflation and the Fed’s resulting aggressive policy approach have narrowed the opportunity for a “softened economic landing” in the U.S.
In the meantime, it may feel like there is no place to hide in capital markets, yet maintaining a diversified asset allocation remains critical for long-term wealth preservation for the majority of investors. In this economic and market outlook, we explore how best to allocate amid economic uncertainty and market volatility in the coming months and quarters. A global allocation opportunity may present itself as countries’ varying economic and policy cycles emerge.