Capital Markets Outlook  |  Q3 2022

Asset Allocations: Interest-rate sensitive bonds may be the most attractive asset in the near term.

  Current quarter
  Previous quarter
    Change from previous quarter
Underweight Neutral Overweight
U.S. large cap
U.S. small cap
U.S. value
U.S. growth
Emerging markets
Fixed income
Interest-rate sensitive
U.S. government
Non-U.S. developed country
Emerging markets
Investment-grade corp. credit
High yield corp. credit
Floating rate loans
Residential mtge. credit
Commercial mtge. credit
Prepayment risk

Currency views

U.S. dollar versus
Favor other Neutral Favor dollar

Equities to remain under pressure

Stocks could rally on any signal of lower inflation, but we would view bear market rallies as opportunities to reduce equity exposure.

Rate-sensitive bonds look attractive

Treasury yields rose above 3% in Q2 and stock-bond price correlations became negative again, making rate-sensitive bonds a possible choice for those taking profits on equities.

Commodities may be challenged

Current energy prices are high and supplies are extremely tight, but the prices of futures contracts might drop if we see signs of a global macroeconomic slowdown.

After the fall

July 12, 2022  |  Capital Markets Outlook

With the S&P 500 in a bear market, the Fed’s aggressive hikes may be too late to tame inflation and too aggressive for a soft landing.

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