There’s no doubt the economic hit will be severe – Goldman Sachs thinks growth will fall from 4% to 2.5% – but investors are looking through a glass half full at more EU cohesion and higher defence spending in the years ahead.
Former Pimco ‘bond king’ Bill Gross reckons the Fed will stop tightening when it becomes clear that higher rates will stall the US economy and, in particular, its housing market.
A diversified portfolio with growth and value shares, inflation-linked bonds, cash, commodities, gold and even some bitcoin looks like it could deliver an even smoother ride than the traditional 60:40 mix, on the basis of numbers from Fidelity’s US arm.
Eased Covid restrictions in Hong Kong could point the way to the end of the discredited Zero Covid policy; market friendly stimulus looks like it’s on its way; and China is talking to the US about solving the stand-off over US-listed Chinese stocks.
They think Brent will be at $60 by the end of the year on the back of: less demand than expected; Russian sanctions having less of an impact than feared on oil supply; a ramp up in Shale production in the US; and forgotten producers like Venezuela and even Iran coming back on stream.
There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments.
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