Macro Matters October 2022

(Source: Merlea Macro Matters)


Central banks around the world have been scrambling to fight soaring high inflation by increasing the cost of borrowing without hurting long-term growth prospects. Adding to the uncertainty and fear are rising tensions between the West and Russia following Moscow’s invasion of Ukraine.

Inflation is becoming more structural, and investors are now concerned about stagflation, suggesting that price hikes may be here to stay for the long haul. Stagflation is a mashup of the words “inflation” and “stagnation” and refers to a situation when inflation is high even as the rate of economic growth slows down.

The war in Ukraine and growing tensions between the West and Russia add to the uncertainty and will continue to spook investors and roil markets. But we are likely in three-quarters of the way through the bear market. October, however, is also associated with historic market plunges. And sceptics are warning investors that negative economic fundamentals could overwhelm seasonal trends as what’s traditionally the roughest period for equities comes to an end. While stock investors are the ones most directly affected by a bear market, there are spill over effects to the rest of the economy primarily due to the “wealth effect”. That is, as households see the value of their retirement and share portfolios decline, they will pull back on their spending.

Given how dependent the global economy is on consumer spending, this impact can be significant and widespread. Discretionary sectors such as travel, leisure, and hospitality may feel the most immediate effect but other industries such as housing and retail trade will experience reduced demand as households grow cautious.

From here, the outlook will hinge almost entirely on the pace at which inflation begins to abate. Unless inflation begins to soften quickly, it’s not likely the pressure on stock and bond markets will ease anytime soon. For now, more signs are pointing to a slowdown in economic growth and the Fed is gearing up for two more interest-rate hikes before the end of 2022.

The dollar is having its best run in 20 years. With U.S. interest rates rising rapidly and investors worried about a global economic slowdown, investors have moved into U.S. currency in search of yield and a safe- haven.

Against that backdrop, investors need to brace for even more volatility and difficult market performance in the coming months.


The misery has been widely shared, from advisors reimagining their clients’ traditional 60/40 portfolios in a transformed fixed income landscape to institutions gauging how much higher yields must climb to compensate for the risk taken. Investors in or near retirement are among the most challenged, sometimes experiencing double-digit declines in their “conservative,” bond-heavy investment portfolios.

Bonds of nearly all kinds posted steep losses as of the end of the third quarter, extending already historic losses from the first half of the year. Many sectors of the bond market are posting their biggest losses on record for the year to date. The year’s massive decline in prices across the bond market has led to a huge rise in bond yields (bond yields and bond prices always move in opposite directions), making them attractive to income investors.

Current market pricing indicates a short, but sharp, tightening cycle from the Fed, and the flattening of the yield curve from the fourth quarter of last year indicates growth will likely moderate in the future.

Many indices are already repricing for this outcome, and in the search for returns above benchmarks, we see the most compelling fixed-income investments in four key areas: Investment-grade corporate bonds, high-yield bonds, securitised credit and emerging-market debt. Among corporate bonds with a relatively low risk of default, we see the most return potential in financials, which could benefit from interest-rate hikes.

Financial companies also have the potential to adjust to higher inflation risks relative to other sectors in the market. After lagging in 2021, emerging-market debt has a lot of room for improvement this year. Central banks in emerging markets have been well ahead of developed markets in raising rates to stem inflation risks. If inflation stabilises as we expect in 2022, then both local emerging-market debt and currencies stand to appreciate as global investors become attracted to the yield, carry and potential returns from this asset class.

Listed Property

REITs are exposed intrinsically to rising bond yields and are often described as a listed proxy to debt market movements. Higher interest rates and higher inflation do not necessarily bode poorly for the sector – at least for REITs that can increase rents at a faster pace than financial and labour costs.

Australian REITs were “attuned” to the rising cost of debt and as a result had a high proportion of fixed financing and a “smooth” debt maturity profile. All REIT sectors “have their challenges in a rising interest rates environment”. CBD retailers continue to struggle, while CBD office landlords have been forced to offer “sizeable” tenant incentives.

We remain cognisant of the structural changes occurring in the retail sector with the growing penetration of online sales and the greater importance of experiential offering inside malls. Recent events will likely accelerate these changes. It is also interesting to note the contrast of very high retail sales figures despite very low levels of consumer confidence, no doubt impacted by rising

costs of living. As interest rates rise by multiples of market expectations and inflation continues to be a thorn in everyday life, many investors continue to hold their cash back for when the picture is clearer.

In contrast, contrarians see the world in the opposite light. To them, the correction has provided a major buying opportunity. In fact, some investors think that the market has now capitulated and that a fresh uptrend is on the horizon. However, with key large capitalisation REITs now trading at a significant discount to the value of their underlying assets, with no value ascribed to embedded active businesses, we believe the sector offers value, particularly in comparison to unlisted property.

Australian Equities

Global stock markets are tanking on fears of recessions in the US, the UK and Europe, and the OECD is forecasting recessions in Europe. The good news is there are several reasons to think Australia might be able to escape a global slide into recession – though it will need careful management.

Australia avoided recession during the 1997 Asian financial crisis, we escaped the 2001 US “tech-wreck”, and we avoided the “great recession” during the global financial crisis.

The Australian Dollar made a 2-year low against the US Dollar in September as global central banks ratcheted up their fight against inflation. The pivot toward a far more aggressive stance for the tightening of monetary policy in the second quarter was backed up by outsized hikes in rates in the third quarter by many global central banks.

At the third quarter’s end, the RBA appears to have backed away from ongoing outsized rate rises. The cash rate has been increased substantially in a short period of time. Reflecting this, the RBA decided to increase the cash rate by 25 basis points this month as it assesses the outlook for inflation and economic growth in Australia.

The tightening of monetary policy is to allay fears of inflation becoming entrenched. The last read of Australian year-on-year CPI to the end of the second quarter came in at 6.1%, well above the RBA’s target of 2-3% on average over the business cycle. CPI in other developed markets is notably higher, except for Japan. The September quarter CPI number won’t be known until 26th October and that is shaping up as a key component for the RBA board to consider at their November monetary policy meeting.

The Australian economy is continuing to grow solidly, and national income is being boosted by a record level of the terms of trade. The labour market is very tight, and many firms are having difficulty hiring workers. The unemployment rate in August was 3.5 per cent, around the lowest rate in almost 50 years. Job vacancies and job ads are both at very high levels, suggesting a further decline in the unemployment rate over the months ahead.

Beyond that, some increase in the unemployment rate is expected as economic growth slows. Wages growth is continuing to pick up from the low rates of recent years, although it remains lower than in other advanced economies where inflation is higher. Given the tight labour market and the upstream price pressures, the RBA will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms in the period ahead.

Headwinds from higher energy prices, rising interest rates, a slowing housing market and weakening global growth are expected to see the Australian economy slow over 2022/23. We expect year-ended real GDP growth will slow from 3.4% in the June quarter 2022 to 2.6% by the end of 2022/23. Nonetheless, our base case view remains for a soft-landing in the economy. The economy should benefit from a re-opening of international borders, which will help support the tourism sector and drive a rebound in population growth from just 0.1% in FY2021 to 1.2% in FY2023. The economy should also continue to benefit from elevated commodity prices, which have been supporting corporate profitability and government budgets. A large pipeline of public infrastructure projects should also continue to support construction activity.

While we expect a soft-landing in the Australian economy, the risks of a recession are high. Our view is that consumer spending should remain resilient given low unemployment, firming wage growth, pent-up demand for services consumption and a likely run-down of elevated savings. However, given the level of household indebtedness in Australia and our exposure to variable rate mortgages, the RBA needs to tread carefully.

Global markets


While some economic indicators suggest that the recovery remains on track, others show that consumers may be stalling out, and that households and businesses are becoming increasingly pessimistic. The US Federal Reserve will have to respond more nimbly to economic softening than it did to strengthening in 2021.

Investors are particularly concerned about the prospect of the United States Federal Reserve raising interest rates so aggressively that the world’s largest economy tips into recession — taking much of the rest of the world with it.

Historically, the US and other central banks have found it difficult to manage the task of raising rates — which raises the cost of borrowing and investment for businesses and households — without dealing a severe blow to economic growth. Past recessions, which are usually defined as two consecutive quarters of negative growth, have been blamed on the Fed’s efforts to cool high inflation, including back-to-back downturns in the early 1980s. Critics, have accused the US Fed this time around of waiting too long to begin raising rates, only to resort to drastic hikes of late to make up for its prior inaction.

Despite holding out hope for a “soft landing” for the economy, US Fed Chair Jerome Powell acknowledged last month that central bank officials “don’t know” whether their efforts to rein in inflation will lead to a recession or how severe a recession would be. If inflation does not show signs of cooling in the last few months of 2022, and measures of inflation expectations start to climb, it would force the Federal Reserve to continue with aggressive rate hikes beyond 2022 into the spring of 2023 — in my opinion that’s when the economy will tip into a recession.

Consumer spending represents the lion’s share of the US economy, but forward-looking businesses may be planning for a slowdown as well. Last month, a survey by the US Federal Reserve Bank of Philadelphia showed that manufacturing companies had the lowest net expectations for increases in future activity since December 2008 – the depths of the Great Recession. More than 85% of firms said that their input prices had increased.

Moreover, financial conditions are already responding rapidly – and pre-emptively – to potential monetary tightening, with Treasury bond yields rising and 30-year fixed mortgage rates soaring from around 3% at the start of the year to over 5% this month. On top of these developments, Russia’s war in Ukraine and the economic slowdown in China will cool the US economy to some extent, further reducing the Fed’s burden.

In addition, long-term inflation expectations are reasonably stable, which means that it should be easier for the Fed to reset short-term inflation now than it was during the 1970s and 1980s, when long-term expectations needed to be re-established from scratch.


European economies are alive because of stimulus. It’s making inflation worse, adding to the already high pricing pressures caused by fuel and food. They now conserve electricity in parts of Europe, as is happening in Germany. The International Monetary Fund downgraded the 2023 growth forecasts for Germany, France, Italy and Spain, citing the Russia-Ukraine war uncertainties and higher interest rates to curb high inflation.

The inflationary situation in Europe calls for a different policy response compared to the US. While the US is facing an overheating because of strong stimulus and waiting too long to tighten, the European economy is weaker, with inflation much more driven by the energy supply shock. While the two economies face similar levels of headline inflation, core inflation in Europe is lower and other indicators of cyclical overheating are much stronger in the US, such as higher wage growth and lower unemployment.

These conditions call for differing policy responses—while there was persistently strong nominal demand in the US that had to be cooled, demand is weaker in Europe and interest rates are unlikely to meaningfully address the problem of high energy prices.

A major element of the European policy response to the energy shortage thus far has been fiscal support to cushion the blow of high energy prices in the form of policies aimed at reducing energy costs (fuel tax cuts, price caps) and direct support to the most vulnerable households and most affected companies.

In many ways, the European energy crisis has similarities with the Brexit shock in the UK—a massive blow to productive capacity that will weaken demand and increase prices, leaving the economy in a secularly less-competitive position. There are no easy policy solutions for restoring productive capacity, and Europe will have to muddle through higher energy costs for some time.

Despite the strong first half of the year, recent indicators suggest the Euro Area has entered Q3 on very weak footing. Purchasing manager surveys descended into contractionary territory for the first time in well over a year, inflationary pressures persist, consumer confidence plummeted to new lows, and geopolitical tensions worsened. More recently, the ECB’s announcement to raise interest rates might slow activity further.

United Kingdom

The U.K. government announced a new fiscal package last week and, while most of the measures were expected, the market has reacted fiercely. The situation remains fluid, and the outlook will largely depend on the future monetary and fiscal policy mix. The government appears determined to push ahead with its tax cut plans and a U-turn seems unlikely. The government has stated that it expects the debt-to-GDP ratio will fall over time and will lay out its medium-term fiscal plan on 23 November. But while the plan may include spending cuts, it is debatable whether these plans will be seen as credible by financial markets given the damage done over the past week.

The pressure for higher market interest rates adds to what was already a very uncertain macro-outlook. In principle, the fiscal package could be positive for growth, as it should free up more money for households to spend. But against that, financial conditions have tightened – despite the currency weakening – which will tend to weigh on activity. Indeed, some mortgage lenders temporarily withdrew some mortgage products for new customers this week. In our outlook before last week’s turmoil we were forecasting a mild recession in the U.K. for the next year, and in our view, the recent tightening of financial conditions will only add to the downside risks. While we expect a credible monetary policy response from the Bank of England (BOE), U.K. financial market volatility is likely to remain.


Stronger-than-expected industrial production and solid labour market data suggest Japan’s economy continued to recover in the current quarter. A further easing of border restrictions and resumption of domestic travel aid programmes will support next quarter’s growth as well. We believe that easing Covid restrictions will boost service activity and service jobs for a while, which will be the main driver behind the fourth quarter growth. Also, given the weak Japanese yen, incoming travel demand could work favourably for the nation’s economy if border restrictions are lifted.

The effect of a weak yen in shoring up Japan’s exporting sector will be limited this year. Manufacturers will face the same problem of rising input costs.

The latest data releases from Japan point to a solid recovery soon and are a positive sign for the wage growth that the Bank of Japan is seeking. Japan is reopening its economy at a slower pace than other Asian countries and the reopening effects are just kicking in, which should be the main driver for the positive outlook for the second half of the year. However, as the headwinds of the global recession grow, the BoJ will take its time to determine whether Japan can still deliver solid outcomes in a sustainable way.

In the month following Russia’s invasion of Ukraine on February 24th, the yen depreciated against the US dollar by nearly 6%, which was one of the steepest records of depreciation by major economies. This steep decline in the yen’s value amid military conflict between Russian and Ukraine runs contrary to the conventional perception of the yen’s safe-haven asset status, as it posits that the currency usually retains its value in times of global financial distress and heightened geopolitical tensions. However, the war between Russia and Ukraine, both important energy and grains exporters, exposed structural vulnerability of the Japanese economy, which aggravates the woes of the yen.

On the other hand, the effect of a weak yen in shoring up Japan’s exporting sector will be limited this year. Manufacturers will face the same problem of rising input costs. Moreover, the Russia-Ukraine conflict will create additional difficulties for Japanese exporters to boost outbound shipments.

The war and the resulting surge in consumer prices will dent economic growth and private consumption in Europe, decreasing orders in an important overseas market for Japanese companies. International trade and financial sanctions on Russia and production disruptions in Ukraine will also disturb supply chains in that region.

This will be a particularly acute issue for Japanese carmakers and electronics manufacturers, which rely on Russian imports of palladium (a metal used in automobile exhaust systems) and are exposed to disruptions of Ukraine-supplied neon, xenon and krypton, which are industrial gases used in the microchip-making process.


China, the world’s second-biggest economy, is in a rocky economic period marked by rolling Covid clampdowns. The timing is awkward, given China is in the run-up to the 20th National Congress of the Communist party in November, which is expected to extend president Xi Jinping’s grip on power. But the issues go beyond the pandemic and notably include a deflating property bubble. The International Monetary Fund (IMF) last month cut its forecast for China’s 2022 GDP growth by a quarter to 3.3%. That would be the slowest pace in four decades – excluding 2020’s Covid crisis dip – and below the government’s 5.5% target.

My biggest concern is employment is the 20% youth unemployment in cities, the highest on record Lockdowns to enforce China’s zero-Covid policy aren’t just denting current growth, future consumption is also being affected, while more young people out of work weakens the prospects for China’s property market.

While China’s economy is roughly three-quarters that of the US or Europe, property assets have ballooned to double the size of America’s and triple Europe’s. The result both inflates the sense of wealth in China but also hugely misallocates resources. Property developers had historically depended on rising home prices and surging sales to justify massive leverage and

overbuilding, but once the bubble began to deflate last year, these over-leveraged property developers ran into serious liquidity and credit constraints that made it impossible for them to complete their construction projects.

But while debt binges in the US in the 1920s and Japan in the 1970-80s preceded “calamities”, and considering these economic challenges, in recent weeks the Chinese government has announced an array of measures to stabilise the economy. These include measures to reduce burden on individuals and businesses, and to promote investment and consumption. Overall, the Chinese government has released over 50 economic support measures since May 2020. Other measures include interest rate subsidies on loans, credit support for financial institutions, and industry-specific support.

For the most part, these policies seek to stabilise the economy and reduce economic hardships rather than provide macro-level stimulus. If successful, this policy approach will stabilize the Chinese economy and set the stage for a sustainable recovery in 2023 and beyond, without saddling the government with high levels of new debt.

Accordingly, individuals and businesses in China can expect additional supportive measures in the weeks and months ahead. Beijing’s control over banks and much else in the economy suggests a slowdown rather than collapse.

Emerging markets

In many emerging countries fiscal policy had been scaled back after the pandemic but is now being stretched to its limits again as governments try to reduce the impact of the higher energy and food prices. And this is understandable; in emerging markets food and energy can weigh up to 50% in the consumer basket having a considerable impact on the purchasing power of households when prices rise. To make matters worse, the Ukraine war triggered food shortages for the world’s poorest people.

Already before the war, a large group of emerging markets was relying on subsidised food and energy. Fiscal spending had to be increased further, to compensate for the recent surge in food and energy prices. Others have for the first time adopted measures to compensate for high inflation, including the reduction of consumption taxes and introducing caps on fuel prices. Obviously, commodity exporters have been better able to limit the impact than commodity importers. No matter how understandable they are, these subsidies leave less room for other highly necessary investments in the future, for instance in education and meeting climate commitments.

Central banks in advanced economies are determined to fight inflation and are tightening their monetary policy at a faster pace than expected, even if this comes at the cost of a recession. Central banks in emerging markets are following a similar course, but lately in smaller steps. In total, around 90 central banks have raised their policy rates this year. Recurrent rate hikes in advanced economies will likely limit global demand and trade. As demand declines, food and energy prices will gradually come down again. And although an energy crisis continues to loom in the near-term, countries are finding alternative solutions in new markets and measures, including price caps, to reduce the surging energy prices.

However, the Fed’s aggressive interest rate hikes have increased recession fears. A flight to safety has already strengthened the US dollar index with its major trading partners by 20% since the start of the year. Consequently, an overwhelming number of

emerging market currencies have depreciated against the US dollar. This has resulted in higher import prices, stronger inflation pressures, and higher debt burdens as central banks that support their currencies through interventions are occasionally forced to deplete their international reserves.

These developments have increased the downside risks to our base scenario. The potential for policy mistakes is large and there are strong limits to the relief governments and central banks can provide in stressed financial markets. If the credibility of central banks to fix inflation is lost, this will, only make the dollar stronger and the pain for emerging markets larger.



In general, when the U.S. dollar strengthens, commodities become more expensive in terms of other currencies, a situation that can lower their demand and thus prices in global markets. In addition, when real yields rise, the opportunity costs increase of holding assets that don’t pay interest or dividends, such as precious metals, leading investors to seek better returns elsewhere.

Looking ahead; there is reason to believe that gold could continue to underperform early in the fourth quarter before bottoming out in late this quarter. Gold’s outlook, however, could improve at the turn of the year as tightening financial conditions begin to trickle through the real economy, reinforcing downside risks for both the U.S. and global economy. Monetary policy acts with a long and variable lag, suggesting that the full negative impact of the Fed’s hiking cycle has yet to be felt. When the detrimental effects start to be more apparent before the quarter ends, defensive assets could benefit, bolstered in part by safe-haven flows. When these events play out, gold prices could stabilise and stage a more durable recovery in the early stages of 2023. In contrast, in the early stages of the fourth quarter, poor fundamentals call for more weakness or, at least, sideways price action.


Prices for energy commodities such as natural gas, coal and crude oil rose markedly at the outset of the invasion of Ukraine due to uncertainty of supplies from Russia. Many advanced economies have pledged to reduce their reliance on imported energy from Russia in response to the war. For example, the European Union has announced plans to cease imports of all Russian coal and most crude oil by the end of this year. At the same time, Russia has also begun reducing the amount of natural gas supplied to Europe through its gas pipelines. Lower supply has caused Europe to increasingly substitute coal in place of gas-fired energy production. This has led to prices of both commodities continuing to rise. In contrast, crude oil prices have begun to ease due to increased supply from other petroleum exporting countries. Prices for crude oil in August were around those offered at the start of the war. However, prices for refined oil products such as diesel have not fallen as quickly as crude oil due to global refinery capacity constraints.

The Opec+ group has decided to reverse the 100,000 barrels/day increase it agreed a month ago – which was itself a snub to calls from the White House for a larger increase. The move is an attempt to support oil prices, after Brent crude dropped below $100/barrel in August, on fears that major economies were falling into recession, hitting demand for energy.

Global inventories and spare capacity are well below the levels that would assure stability. And by early next year, European sanctions over Russia’s invasion of Ukraine are intended to tighten, in a bid to curb Russian oil sales, and the United States is planning to stop drawing down its Strategic Petroleum Reserve.

Agriculture commodities

Global growth expectations have been lowered due to widespread inflation and a sluggish Chinese economy The cost of food and fertiliser remains very high worldwide, despite falling a little in recent months. The World Bank now expects that global food prices will remain at very high levels through the end of 2024, worsening food security and reversing years of development gains.

Many countries have continued their restrictions on trade in agricultural products, although the level of restrictions has fallen from peaks. A third straight La Niña event forecast for late 2022 is now the climate model consensus – roughly a once-every-30-years event. Globally, a third consecutive La Niña event may result in below average rainfall for the southern United States, southern Brazil and much of Argentina. This could have implications for global grain production during 2022–23 in the southern hemisphere and into 2023–24 in the northern hemisphere. While good for national production prospects, this could result in significant localised impacts such as flooding, livestock losses, and quality downgrades for crops like those seen in 2021–22.

Sector 12 Month Forecast Economic and Political Predictions
AUD 65c-76c


The $A is likely to remain volatile in the short-term as global uncertainties persist. However, a rising trend in the $A is likely over the medium-term as commodity prices ultimately remain in a super cycle bull market.
Gold Hold

$US1500-/oz- $US1900/oz


The gold market narrative has been driven by the contrasting effects of persistent high inflation and central banks raising interest rates in response. With the US dollar hitting a 20-year high.
Commodities BUY

World aluminium demand growth is set to shift up a gear driven by energy transition-related sectors such as transportation and renewable energy from China, the US and Europe.

Prices for raw materials like oil, metals and agricultural products usually increase along with inflation, so they can be a good hedge against it.

Commodities of the Future’. They are copper, nickel, aluminium, lithium, cobalt, tin, rare earths, metal scrap and green steel.

Property BUY



Valuations have remained buoyant and there are growing expectations rental collections will rise, and we will see improved visibility of earnings. Balance sheets generally look good, with the sector’s average gearing levels at 28%, supporting further growth through acquisitions and development. Earnings forecasts have also been positive amid the improving economic backdrop.
Australian Equities BUY


The best sectors in this phase include energy, utilities, healthcare, and consumer staples. The Australia Stock Market Index (AU200) is expected to trade at 6936.44 points by the end of this quarter. The Australian market “currently looks fair value”
Bonds Begin to increase duration



Current market pricing indicates a short, but sharp, tightening cycle from the Fed, and the flattening of the yield curve from the fourth quarter of last year indicates growth will likely moderate in the future. Many indices are already repricing for this outcome, and in the search for returns above benchmarks, we see the most compelling fixed-income investments in four key areas: Investment-grade corporate bonds, high-yield bonds, securitized credit and emerging-market debt.
Cash Rates 2.5%-3.5% Based on the latest predictions, the cash rate in Australia is expected to climb to a peak of up to 3.35%, with inflation possibly surging to 7% by the end of 2022 and not likely to fall until early in 2023.
America Underweight


The September CPI report is scheduled for release on Oct. 13, while the Fed’s preferred measure of inflation—the personal consumption expenditures (PCE) price index—will be released on Oct. 28. We will be watching “the more sticky forms of inflation,” such as food and shelter prices, in the next CPI report. Quarterly earnings reports that companies release in the weeks ahead will be crucial. The focus for investors will be less on past results and more on what companies have to say about their outlook for the rest of the year and the year ahead.
Europe Neutral


Measures proposed by the European Commission could also help to ease tensions somewhat. The near-term EU proposals focus on three main areas: a plan for EU-wide electricity savings, with a broad target of 10% for general consumption; an EU-level uniform cap on energy prices; and a tax on the revenues of fossil fuels producers.

On the economic front, the situation continued to deteriorate during the third quarter,

Most data released in the quarter illustrated the loss of momentum in the UK economy. Consumer confidence fell to an all-time low in September and the PMI business survey dropped further into contractionary territory. The labour market remained a bright spot as the unemployment rate fell to 3.6%. The UK, meanwhile, is clearly sliding into a recession while inflation continues to rip higher, posing an intractable dilemma for the Bank of England.

Japan Accumulate


We’re becoming cautious on Japan’s economy whose leading indicators have slowed down. Manufacturing activity is contracting and weak global demand is pressuring the export sector. We like still-easy monetary policy and increasing dividend payouts. Slowing global growth is a risk.
Emerging markets Start Buying


Emerging markets have been underperforming developed markets for more than a decade. However, a number of the largest emerging-market economies are in a stronger position to rebound than developed markets as many of their central banks were ahead of the curve in tightening monetary policy last year.
China Accumulate


The Chinese economy was confronted with several headwinds in the quarter, such as the country’s zero Covid policy, weather-related disruptions, and lingering weakness in the housing market. However, while at the start of the quarter most economic data remained weak, the data started to improve throughout the quarter on the back of policy measures which supported fixed asset investment and industrial production. China’s economy remains fragile, as illustrated by weak credit demand. Weak domestic demand implies that China is not facing the inflation pressures faced by most other countries.




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