It has been a turbulent time for investment portfolios, dominated by the impact of actual and expected interest rate rises as central banks continue to fight inflation. Equity markets dipped in June, but generally rallied as the quarterly results season progressed. By August, the S&P 500 was 17% up from the June low. However, the optimism was short lived as central banks on both sides of the Atlantic made it clear they were prepared to raise rates aggressively to counter the surge in inflation. Equity markets fell back and by the end of the quarter the S&P 500 reached a new low for the year.
At a glance
- Inflation remains high, with real wages under pressure.
- Central banks remain on a tightening path
- The US dollar has strengthened against most other currencies
- Bond markets have priced in higher rates
- Equity markets have seen a sizeable correction this year, and w hilst we expect volatility to remain high, the underlying valuations of equities with quality earnings should play out in the long run.