SSGA: We are concerned about boom-bust scenario due to monetary tightening
It is no surprise that, given the geopolitical, policy, and market events of the last few months, State Street Global Advisors’ market outlook has evolved from the views we expressed in their 2022 Global Market Outlook (published last December). This update summarizes the asset manager’s most recent thinking, including current macroeconomic and geopolitical outlooks, as well as market outlooks by asset class.
“As we look forward over the rest of this year, we’re particularly focused on the risk that the reopening-fueled boom will give way to a bust induced by aggressive tightening. Against this uncertain backdrop, our top-level takeaways for investors include: Look for relative value opportunities until uncertainties are resolved, consider commodities as a hedge for elevated inflation, and emphasize quality assets for their earnings resilience,” Lori Heinel, Global Chief Investment Officer, writes.
Simona Mocuta, Chief Economist, expresses her concerns regarding the current path of monetary policies: “While central banks are rightly initiating or accelerating rate hikes in a quest to bring monetary policy into better alignment with employment and price indicators, we can’t help but feel some nervousness around what may turn out to be excessively aggressive market pricing for rate hikes. We are concerned about a boom-bust scenario brought about by tightening that could prove to be too much, too late; we would prefer a more cautious path.”