Abbey Road Investment Views, Feb. 2022
Updated: Mar 1, 2022
• Market volatility is making investors nervous
• Inflation is key in 2022. See Focus page 2
• China’s slowdown will intensify. See Regions page 3
• US rates up steadily, Euro zone rates to stay low
Two concerns are dominating investors’ minds – the rotation in stock markets with its risks and potential opportunities - and central banks’ responses to inflation. They are of course
linked. Expectations for higher US rates have triggered a rise in bond yields and a US stock market sell-off. Underneath the (so far) modest overall index decline there is a churning to
favour value stocks over growth stocks, especially the more speculative ones with limited or no earnings. The driver of all this is rising real yields, or rather less negative real yields, as
investors react to the tougher Fed stance. But neither bond yields in general nor inflation expectations in particular are signaling any problem with inflation in the long-term. This may
be too sanguine...
Download the full Investment View of the month below.