Capital Markets Outlook | Q4 2022
Asset allocations: Be cautious with risk assets as rate increases continue.
|
Current quarter Previous quarter Change from previous quarter |
Underweight | Neutral | Overweight |
|---|---|---|---|
| Equity | |||
| U.S. large cap | |||
| U.S. small cap | |||
| U.S. value | |||
| U.S. growth | |||
| Europe | |||
| Japan | |||
| Emerging markets | |||
| Fixed income | |||
| Interest-rate sensitive | |||
| U.S. government | |||
| Non-U.S. developed country | |||
| Emerging markets | |||
| Corporate credit | |||
| Investment grade / High yield / Floating rate | |||
| Securitized | |||
| Residential mortgage credit | |||
| Commercial mortgage credit | |||
| Prepayment risk | |||
| Commodities | |||
| Cash |
Currency viewsU.S. dollar versus |
Favor other | Neutral | Favor dollar |
|---|---|---|---|
| Euro | |||
| Pound | |||
| Yen |
Equities to remain under pressure
Investors should exercise caution with equities, but also be aware of the potential for a bear market rally as in early Q3.
Highly selective in fixed income
Caution is warranted for high-yield bonds and other areas of corporate credit, while securitized sectors offer more attractive opportunities.
Commodities could benefit from energy rally
In energy markets, inventory levels of distillates remain tight and production may be constrained in the near term.
Price stability and credibility
October 13, 2022 | Capital Markets Outlook
As the Fed's interest-rate hikes make a recession more likely, 2023 earnings estimates for stocks need to come down.
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