As one contagion ends, another begins. The symptoms of a stagflationary slowdown are pronounced. About two-thirds of economists polled by the Financial Times expect a US recession. UK gross domestic product fell unexpectedly in April. Cryptocurrencies, a prime indicator of speculative exuberance, are slumping.
As equities and bonds lurch downward, investors are rushing for safety. The MSCI All-Country index (ACWI) has already lost 18 per cent in dollar terms this year. Lex is holding to its expectation of a long, grinding market correction amid extempore monetary policymaking. Here are some defensive strategies for the months ahead.
Bonds deserve attention, especially those denominated in the strong US dollar. Any bet on fixed income is dependent on where you think inflation will peak. In corporate credit, favour businesses with strong balance sheets and cash flows. A zero weighting to high-yield bonds makes sense.