Schroders Market Update
Every quarter, one of our asset managers from Schroders will provide an update into how the financial market is performing. Johanna Kyrklund - Group Chief Investment Officer and Global Head of Multi-Asset Investments, offers her insights on the different economic factors that influence the market conditions in the video below.
Johanna Kyrklund - Group Chief Investment Officer and Global Head of Multi-Asset Investments
Johanna Kyrklund is Group Chief Investment Officer and Global Head of Multi-Asset Investments at Schroders and joined in 2007. Responsible for investments on behalf of Multi-Asset clients globally and is the head portfolio manager of the Schroder Diversified Growth Strategy. Johanna leads the Multi-Asset Investments division, is a member of the Group Management Committee (GMC) and Chairs the Global Asset Allocation Committee.
Compared to the beginning of the year, we believe that the easy money from the reopening trade has been made. Looking at our risk assessment at the beginning of the year we had a reflationary tilt to our forecasts while now we’re pondering the risk of stagflation. We think investors are going to have to digest the likelihood that growth momentum will be peaking and that interest rates will be rising in 2022.
We still see some upside for equities because of strong corporate profits so we remain overweight, but we've reduced the extent of that overweight position. We also continue to be underweight bonds because we think that the potential for central banks to withdraw liquidity is still underestimated by investors.
Over the summer, we saw considerable volatility in China driven by the imposition of new regulatory controls in a number of sectors. We see this as a targeted recalibration of the system. But nevertheless, we do believe that political risk premium has to be applied to Chinese stocks. For now, we judge that it's too early to reallocate to emerging equities, particularly given our concerns about growth also peaking in the next few months.
So all in all, compared to the beginning of the year, we’re slightly less pro-cyclically positioned, but still looking to generate a bit more return from our equity positions.
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