We expect the US dollar to remain firm but with limited appreciation relative to 2022, given our view that it is near the end of its incredible multi-year run. We believe gold’s performance will improve and digital assets, in general, will not surpass prior highs, many of which were set in 2021.
Asset markets broadly advanced in November. The global equity rally continued as surging Chinese shares helped broader emerging markets outpace developed peers.
Risk assets rallied in October. Global equities recovered some of their steep third quarter losses, as developed markets topped emerging counterparts.
Risk assets declined again in third quarter. Global equities recorded the worst three-quarter decline since the 2008–09 Global Financial Crisis.
Yes. The hawkish Federal Reserve and energy market challenges have contributed to a strengthening of the US dollar in recent quarters, and we expect that trends in both factors may continue to be supportive of the dollar in the short term. Nonetheless, on a longer horizon, historical precedents suggest that the dollar is approaching the end of a multiyear bull run.
A major Ethereum blockchain software upgrade was successfully completed earlier today, marking a landmark event for the digital assets industry. The upgrade, known as the “merge,” changes how transactions are verified on Ethereum’s blockchain and dramatically improves its energy efficiency. While this is welcome news, we doubt this means the rout in digital assets prices is over in the near term, as macro headwinds continue to be the most important factor driving prices.
Risk assets broadly retreated in August, reversing course mid-month on the growing realization that elevated interest rates may be around longer than expected.
Risk assets rebounded in July as stocks rallied off recent bear market lows and bond yields ticked lower, boosted by better-than-expected second quarter earnings results and signs that the Federal Reserve could slow the pace of interest rate increases sooner than anticipated.
Fiscal year 2022 was a challenging one for public market investments. Rising levels of inflation across most developed and emerging markets saw central banks become more aggressive in their monetary tightening plans. This in turn saw correlations between bonds and equities become positive; bonds declined as a direct result of higher inflation and tighter policy, while equities weakened in response to the higher cost of capital. This chart book presents returns and other market metrics for fiscal year 2022.
Investor sentiment soured in second quarter, leading to steep declines across nearly all asset classes. Global equities foundered as developed and emerging stocks alike fell into bear markets. Rising interest rates and deteriorating global economic growth prospects meant growth stocks trailed value, while large caps edged small caps. Aggressive monetary tightening and high inflation pressured government bond performance, while corporates lagged on rising credit spreads. Real assets also declined, with energy commodities being the lone exception among major asset classes as oil prices continued climbing. Against this backdrop, the US dollar appreciated to a 20-year high, euro performance was mixed, and UK sterling mostly weakened.