Liontrust Multi-Asset Quarter in Review - Flipbook - Page 4
Our view of investment markets
• With stocks having derated so far, pricing in aggressive policy
tightening by central banks, we see a buying opportunity in
markets but will take a patient approach as we move towards our
target asset allocation.
• UK equities remain cheap and even the S&P 500, long the poster
child of overpriced tech giants, is trading slightly below its 10-year
average after recent selling, at around 16 times forward earnings.
• We may already be more than halfway through any bear market
decline (which tends to last nine to 12 months). While the average
peak to trough of 30-40% suggests more room to fall for the S&P
500, for example, most bear periods also include sharp shortterm reversals.
• Given the role of central banks and their focus on – hopefully
softening – inflation figures to direct policy, the summer months
and beyond are likely to be volatile.
With stocks having derated so far,
we see a buying opportunity in markets
but will take a patient approach as we
move towards our target asset allocation
• Our view is that post-corrections, markets should move beyond
indiscriminate selling and focus more on what the earnings cycle
is actually telling us.
• This is typically an environment where active managers can prove
their worth in assessing how inflation is affecting companies
around the world and which are best placed to thrive.
• Yields continue to rise (and capital values fall) as interest rates
climb, putting pressure on government bonds.
• Fixed income has not only correlated with equities in the short term
(negating the impact of diversification), its performance is worse,
particularly in the UK.
• The best antidote for short-term volatility is a diversified portfolio
and a resolute focus on long-term outcomes.
While the average peak to trough of
30-40% suggests more room to fall in the
S&P 500, for example, most bear periods
also include sharp short-term reversals
4 - Liontrust Multi-Asset Funds and Portfolios Quarterly Report: Q2 2022
The best antidote for short-term
volatility is a diversified portfolio
and a resolute focus on
long-term outcomes