Liontrust Views Winter 2023 - Flipbook - Page 5
RISKS
Central banks have been walking a tightrope
between raising interest rates to tame
inflation while avoiding too much damage
to the economy. They delivered statements
in December warning interest rates would
stay higher for longer – but pricing pressures
An economic slowdown and the impact
that will have on company earnings and
financial strength is a broad worry in
2023. Our own view though is that a mild
recession is more likely than a protracted
downturn, with the global economy in
reasonable shape.
appear to be abating, with inflation rates in
the US and Europe down from the highs they
Sadly, the war in Ukraine continues and
hit earlier in 2022.
could step up again this year if President Putin
deploys the fresh troops he has mobilised.
The energy crisis resulting from the war has
caused particular challenges for Europe.
FINANCIAL
MARKETS
Stock markets were more settled in the fourth
Bond markets also settled in the fourth
quarter of 2022, ending the severe volatility
quarter after the soaring interest rates used
they went through earlier in the year. The S&P
to tackle inflation pushed down their values
500 Index, for example, was up around 8%
in a historic sell-off. When interest rates
over the quarter.
rise, bond prices fall so that the coupons
they pay (yields) are in line with what is
available elsewhere in the market.
CONCLUSION
The relentless stream of negative economic
saw opportunities to buy assets at prices that
and geopolitical news dissipated towards
had been knocked down throughout 2022.
the end of 2022, giving investors a reprieve.
While there are reasons to be optimistic
Positive news was still scarce, but it was
about 2023, investing is never easy – there
enough to support markets in what looked
are still risks and a cautious approach is
increasingly like a turning point as investors
still required.
LIONTRUST VIEWS – WINTER
5