Introduction……
Markets have without a doubt had a very difficult first half of the year. Equities have seen the worst opening 6 months in over fifty years, and bonds have seen their worst drawdown in a century. Clearly, two factors have been driving this – slowing economic growth and persistently high inflation. Three major shocks this year have unexpectedly affected global growth prospects; firstly, the war in Ukraine and the unprecedented inflationary impact particularly on energy and food prices around the globe. Second, the uneven opening and closing of the Chinese economy due to Beijing’s unusual zero-covid policy. Third, and most importantly, the major central banks have been forced to tighten policy much more aggressively than was planned for at the beginning of 2022, as they desperately attempt to get inflation under control.
We understand that bear markets can be daunting for many investors. At Seaspray, we believe and reaffirm our house view that after a torrid and arduous first half to 2022 across most asset classes, much if not all of the bad news is already reflected in prices, leading us on to a potential recovery during H2 and into 2023. While the final bottom may not be in just yet for equities, buying opportunities at current prices are presenting themselves to us in a variety of sectors and will likely continue to do so over the coming weeks and months.
As we now move into H2 2022, from a long-term standpoint, we believe we are approaching a very over-sold state in equities, and we will explore this view and our outlook in detail in this market update.
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