Markets remain on edge as Russia’s invasion of Ukraine combined with ongoing concerns around inflation and the path of interest rates continue to create volatile conditions. We expect markets will remain skittish in the near-term and we continue to exercise some tactical caution around risk assets.
While we have some tactical caution, we retain our constructive 12-month outlook for domestic (preferred) and global equities. Our positive 12-month view is premised on the prospect of an extension of the current phase of above-average growth for both the global and domestic economy. This should continue to support the global and domestic earnings cycle. In addition, global monetary policy remains highly accommodative. Policy is set to tighten but is far from neutral, let alone approaching restrictive levels. We see this as a supportive base for risk assets.
While our base case remains constructive, there is no question that the “wall of worry” has edged higher this year. Inflation has continued to pick up and looks stickier than envisaged just a few months ago. Russia’s invasion of Ukraine has raised tail risks, particularly in relation to global energy markets. We delve into this wall of worry, addressing:
- Why Russia Ukraine crisis is unlikely to derail the global expansion
- Inflation still the main worry for markets
- Why we remain cautiously constructive and investment implications
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Written by
David Cassidy, Head of Investment Strategy
David is one of Australia’s leading investment strategists.