February 2023 - Monthly House Views
Chinese New Year
China’s re-opening bolsters our base case scenario of a relatively soft landing. The start of the year brought relief for some of the risks overshadowing the world's economy. First, the rapid ending of Covid lockdowns in China should prompt a rebound in domestic demand which will also be good news for its trading partners. Elsewhere, the easing of pressures on Europe’s energy markets helps alleviate some of the continent's problems.
These pieces of good news confirm our belief that the economy is headed for a relatively soft landing, with recessionary environments not unlikely but playing out comparatively mild by historical standards. While above-average inflation continues to weaken household purchasing power and tighter interest rates discourage corporate investment, households are still sitting on substantial, albeit falling, Covid savings and labour markets continue to be strong.
We maintain a slight underweight to equities amidst elevated recession risks, and continue to favour UK large caps and real assets such as infrastructure for inflation sensitivity, diversification and yield. We also continue to hold an substantial stable of diversifiers such as cash, government bonds and gold.
Read more in our February 2023 House Views by clicking on the document below.
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