Published On: February 25th, 2022|By |Categories: Market Updates|1.2 min read|

This is the summary of our weekly update, you can read the full blog here

The major theme in 2022 is very simple: rising bond yields. Many charts show this happening, but one of the most dramatic is the sudden reduction in negative yielding debt. Only a year ago we had over $18 trillion of negative yielding debt – that number now stands at around $4 trillion as shown in the chart below!

$ Value of Negative Yielding Global Debt

Source: Bloomberg Finance

The cause of this sudden shift is also equally clear – rising inflation. The big question is whether the monetary authorities will be able to put the inflation genie back in the bottle without causing too much economic pain. As we have stated before, higher inflation leads to lower equity returns. See for example the chart below. When inflation is high (between 4 and 8%) equity markets do more poorly. Take for example over 12 months. Normally the S&P 500 would be expected to return around 9% (blue bar). Higher inflation reduces this by almost half to 4.9% (red bar).

Forward S&P 500 Performance When CPI y/y Between 4% & 8%

Source: Strategas Research Partners

A more detailed discussion of the difficulties facing the authorities in combatting inflation is available in our full blog.

In summary – we still maintain a constructive outlook for equities returns in 2022, but recognise that risks are increasing. We are certainly not making an outright bearish call on equities, and our portfolios remain strongly positioned for the new environment with our strong value bias at both the geographical and sector level.


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David Williams (1970) is responsible for the investment policy of Mpartners. After a brief career in diplomacy with the Ministry of Foreign affairs in Barbados, David joined Insinger de Beaufort asset management in 1997 and became a director in 2002. He was responsible for the investment team and the investment funds (long-only and hedged). His specialism is European equities. David holds a B.A. (Hons) from the University of Kent, an M.Sc. from the London School of Economics and an M.B.A. from Nijenrode university.