The current context of record high inflation with the risk of a sharp economic slowdown is exceptional. Will the Fed be able to engineer a “soft landing”?

Our leading indicators (macro & fundamental) continue to point towards challenges for equity markets. From a technical standpoint, the long-term equity bull market trend is being challenged while market breadth is not showing much signs of improvement. In Fixed Income, we remain cautious on rates and keep a disinclination stance on credit spreads. In Forex, we keep a disinclination stance on the EUR. Our “core” scenario for 2022 is adjusted towards weaker growth and higher inflation. Our leading indicators (macro & fundamental) continue to point towards challenges for equity markets. From a technical standpoint, the long-term equity bull market trend is being challenged while market breadth is not showing much signs of improvement. In Fixed Income, we remain cautious on rates and keep a disinclination stance on credit spreads. In Forex, we keep a disinclination stance on the EUR. Our “core” scenario for 2022 is adjusted towards weaker growth and higher inflation.

After an exceptional 2021, the first quarter of 2022 has been an emotional and difficult one for investors. Russia’s invasion of Ukraine, surging inflation and the start of the Fed rate hike cycle weighed on both equities and bonds performance while commodities thrived. Here are 10 stories to remember from an eventful quarter.

The succession of two major crises (the Covid-19 pandemic and then Russia's war against Ukraine) could lead to major and lasting changes to the world order. In today’s Focus, we review 10 potential macroeconomic and financial trends which could shape the next decade.

The U.S. Federal Reserve has put an end to its QE “4” (Quantitative Easing) and is even considering reducing the size of its balance sheet. A perilous exercise. Quantitative Easing is coming to an end in the US. But can the Fed afford to move into Quantitative Tightening? In today’s focus, we take a look at the effects of the decade long experiment that was QE, and what comes next.

We have been gradually reducing our exposure to equities and credit over the last few months based not only on fundamental & technical indicators but also on systematic risk balancing. As a further step in this de-risking process, we are downgrading our equity view by another notch, from cautious to disinclination. We believe that a clear reduction in exposure to European markets is warranted in a context of huge uncertainty created by the war in Ukraine. We chose to sit on the sideline and wait for more visibility, on the geopolitical, economic and corporate earnings outlook.

The economic sanctions imposed on Russia by the West in retaliation to the invasion of Ukraine could prompt central banks to rethink their foreign- currency reserve policy. Today’s Focus looks at how the world may adapt after the sudden realization that their heavily dollar-dependent reserves can be confiscated overnight.

The war between Russia and Ukraine will soon enter a third week. In our latest Focus, we consider four scenarios to examine the potential implications for the global economy and financial markets. These scenarios have different geopolitical narratives. In the first scenario (medium to high probability), a Russian military victory leads to an unstable Ukraine and to Cold War II. The second scenario (medium to high probability) involves a negotiated deal between Russia and Ukraine. The third scenario (medium to low probability) is the scariest one: a Russia- NATO armed conflict including the use of tactical nuclear weapons. The fourth scenario (a coup against Putin) has the lowest probability to take place but still has merit. Below we detail the consequences of each scenario on growth, inflation, monetary policy as well as on the performance of the main asset classes.

China and Russia aim to weaken the US hegemony and the reign of the greenback. The tragic invasion of Ukraine could be seen as one step in a long-term process. In our latest Focus, we reflect on the profound changes at play, and the pressures the long-standing US supremacy is under. Its dollar is being questioned as an absolute reference for global trade, and flexing its military muscles seems to be less intimidating than it once was. In a world vastly different than the petrodollar world economy Richard Nixon helped shape, Chinese President Xi will play a key role in the new global balance of power.

SPECIAL ASSET ALLOCATION INSIGHTS The Russia-Ukraine conflict has pushed geopolitical risk to a very high level and is having a meaningful impact on global financial markets today through: 1. the rise of equity risk premium, 2. tighter financial conditions and 3. higher inflation ahead due to rising energy costs. We held an extraordinary investment strategy meeting this morning and would like to share our key takeaways below.