CIO Insights 3Q22


Rising Above Inflation
Chief Investment Office11 Jul 2022
Photo credit: AFP Photo


Dear valued clients,

Clearly, the elephant in the room for financial markets is the soaring inflation rate. Until we see some normalisation of supply chains, inflation will continue to be a bugbear.

The Fed has responded with three rate hikes and has articulated that more are to come. It is worth noting, however, that much of the impending hikes have already been priced in – as shown in the 2Y Treasury yield spiking from 0.75% to above 3.00% from the beginning of the year.

Barring further deterioration on the geopolitical front, we are hopeful for a better showing of risk assets in the second half of the year.

In 3Q22, we reaffirm our preference for securities of high quality. Seek companies with wide economic moats. The bifurcation in performance between Big Tech versus emerging, yet-to-be profitable ones is evidence of this flight-to-quality.

Our Overweight China call has panned out and continues to offer favourable risk-reward.

On fixed income, investment grade bonds at over 4% stand out as an attractive alternative to holding deposits.

In this edition of CIO Insights, we initiate commodity investing as an inflation winner and highlight how companies that ascribe to “Content is King” rise to have strong economic moats.

We believe these insights are the gateway to a resilient portfolio and will empower you to ride through these inflationary times.

 

Hou Wey Fook, CFA

Chief Investment Officer

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