Here’s our summary of the markets

The outlook for the global economy is deteriorating. Inflation is peaking but remains at a structurally higher level, the Ukraine-Russia conflict is showing no signs of a ceasefire, and the energy crisis is worsening as Russia has halted gas exports to Europe. However, the labor market is likely to stay relatively robust.

The US economy fell into a technical recession, and the spread between the 10-year and 2-year Treasury yields inverted, increasing the likelihood of the US economy entering a mild recession. However, we still see some reassuring signals on the labor, consumer, and corporate sides. In addition, government spending programs will support employment and the overall economy.

In Europe, the dangerous cocktail of stalling economies, increasing inflation rates, and diminishing natural gas supply may lead the eurozone into a severe recession.


Market volatility will remain elevated given the uncertain economic backdrop. Therefore, we significantly reduced risk and increased cash within our portfolios to protect capital. At current valuation levels and from a risk/return perspective, we prefer selective credit over equities. Hence, we maintain our small underweight position in equities. We currently consider non-cyclical short-term HY bonds with yields of 8-9% very attractive and hold duration risk only as a portfolio diversifier. In this environment, we prefer an absolute return approach over a classic relative value mandate.

Don’t miss our complete 4th quarter 2022 investment letter, which includes a more detailed look at the regional macroeconomic backdrop, market consensus forecasts, and more.



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Find our previous 2022 quarterly investment letters here:
Q1 2022

Q2 2022

Q3 2022

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