2022 has had an eventful start to the year, to say the least. Market volatility has been elevated, with the Federal Reserve and European Central Bank pivoting to hawkish rhetoric amidst soaring inflation. Markets were roiled as investors repriced interest rate expectations. The sharp and hawkish pivot resulted in the contraction of equity multiples, and surging yields in fixed income. Equities and fixed income fell in tandem, as historically negative correlation between the two converged instead. Inflation concerns were exacerbated by Russia’s invasion of Ukraine on the 24th of February. While a potential invasion was deemed unlikely by us, we nevertheless protected our portfolios by increasing our overweight in energy equities before the event. As an investment house, our philosophy has always been to focus on downside protection before reaching for the upside. We base the resiliency of our forecasts on Karl Popper’s Falsification Principle while pointing to the poor track record of humans and models in predicting low probability and high impact events – termed Black Swans by Nassim Nicholas Taleb.

We discuss our outlook and the factors we see as key to drive markets going forward below :