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Source: Just Service Global Investment Committee
Global Investment Outlook:
The global investment landscape for the next 6 to 12 months is expected to be characterized by a combination of moderate growth, persistent inflation, and central bank tightening. While economic growth is projected to slow from the rapid pace of 2022, it is still expected to remain positive in most major economies. Inflation is likely to remain elevated, driven by supply chain disruptions, energy prices, and strong consumer demand. Central banks are expected to continue raising interest rates to combat inflation, which could put some pressure on equity markets.
Impact of Geopolitical Conflicts:
The ongoing conflicts in Ukraine and the Middle East, specifically the ongoing tensions between Hamas and Israel, are having a significant impact on global markets. These conflicts are contributing to uncertainty and volatility, affecting various economic sectors and asset classes.
Energy Markets: The Ukraine war has disrupted energy supplies, leading to a surge in oil and gas prices. This has a direct impact on transportation costs, manufacturing costs, and consumer energy bills. The potential for further disruptions or sanctions on Russian energy exports could keep energy prices elevated, adding to inflationary pressures.
Commodity Markets: The conflicts have also affected other commodities, such as wheat, corn, and metals. Ukraine is a major exporter of wheat, and the war has disrupted planting and harvesting, leading to supply shortages and price increases. This could exacerbate food insecurity in some regions.
Equity Markets: The overall uncertainty and risk aversion caused by the conflicts have led to increased volatility in equity markets. Investors are reassessing their risk appetite and may shift their portfolios towards safer assets. This could affect the valuations of companies and overall market sentiment.
Regional Impacts: The conflicts have a more direct impact on the economies of the regions involved. Ukraine's economy is severely affected by the war, while Russia is facing sanctions and economic isolation. The Middle East conflict could affect economic activity and tourism in the region.
Geopolitical Risks: The escalation of these conflicts could lead to broader geopolitical tensions and instability, further affecting investor confidence and global economic cooperation. The potential for wider military involvement or the use of unconventional weapons could have severe consequences for global markets.
Global Outlook by Asset Class:
Equities:
Developed markets equities are expected to remain attractive due to the ongoing economic recovery, strong corporate earnings, and relatively attractive valuations. However, investors should be mindful of the potential impact of rising interest rates and geopolitical tensions on equity valuations.
Geographic Preferences:
Asia ex Japan offers diversification and growth potential, driven by strong economic fundamentals, rising middle-class consumption, and increasing digitalization. This region is particularly appealing due to its resilience during recent global economic challenges.
Europe is poised for a post-pandemic rebound, supported by fiscal stimulus measures, a favorable currency environment, and the potential resolution of geopolitical tensions.
Thematic Investments:
Sustainability and ESG aligned funds are gaining traction as investors prioritize responsible investing and environmental consciousness.
Technology and innovation funds continue to offer growth opportunities as technological advancements transform industries and most especially AI
Healthcare innovation (via technology) remains a key focus, driven by aging populations, increasing healthcare spending, and advancements in medical technology.
Alternatives:
Private equity continues to attract investors seeking diversification and potential for higher returns.
Hedge funds offer diversification and potential for uncorrelated returns amid a complex geopolitical and economic landscape.
As always talk to your adviser within the Just Service Network if you would like information or otherwise review your personal financial planning.
For all enquiries email info@justserviceglobal.com
Regards
The Just Service Client Service Team