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The Multi-Asset Process

November 2022 Market Review

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.
  • Global equities see second month of gains; bond yields narrow
  • Investors encouraged by signs that inflation is peaking
  • Fed Chair Jay Powell signals less aggressive rate hikes

Global equities notched up successive months of gains in November for the first time since the summer of 2021, while yields narrowed in bond markets. An index of global stocks has trimmed its loss so far this year to about 18%. In the commodities sector, gold saw its biggest monthly gain since May 2021 as the dollar fell on signs the US Federal Reserve is preparing to slow the pace of interest rate hikes. 

A new report from Capital Economics suggested global inflation had peaked and that the pace of rising prices would slow in the coming months. The report pointed out that price pressures on global supply chains were easing and that expectations of factory gate prices, shipping rates, commodity prices and inflation were subsiding from recent record levels. Capital Economics also said it expected high energy prices to flatten out in 2023 and that consumer prices had already peaked across emerging markets. 

It is looking increasingly like a turning point in markets. A New York-based US small cap fund manager told us that now is not the time to be getting more defensive with the market down 22%: “Ultimately, [prior to this year] we have been in a FOMO (‘fear of missing out’) market but now we are moving to one of risk-adjusted returns, rather than return at any risk.” 

However, another US manager said earnings forecasts for 2023 are 10-20% too high. “A bear market ends when earnings expectations bottom, not with the final rate hike. Investors should prefer bonds over stocks when the tightening cycle matures and the yield curve inversion is at its maximum level, which has probably happened.” 

Although we are still cautious on equities, we are raising risk exposure in the portfolios slightly and are increasingly positive on fixed income, especially high yield, because of the attractive spreads that are now available in the market.  

US dollar weakens 
The US dollar fell against a basket of peers in the first half of November on expectations that the Federal Reserve would ease off its monetary tightening. The weakening eased the inflationary pressures on smaller economies around the world and the debt problems for countries and companies, especially in emerging markets, that borrow heavily in US dollars. Latest data had shown that US inflation in October slowed to 7.7%, less than the anticipated 8%. US manufacturing data also fell below forecasts, adding further credence to the peak inflation narrative. Fed Chair Jay Powell also boosted global markets when he told a press conference that the next rate rise would likely only be 50bps, ending a run of four 75bp hikes.  

UK looking steadier 
Inflation continued to be a worry in the UK, however, where it hit a 41-year high in October of 11.1%, driven by rising energy and food prices. The Bank of England (BoE) raised interest rates by 75bps to 3% in what was the biggest hike since 1989. But the UK was looking steadier after the disruptions caused by the previous Prime Minister and her Chancellor; Jeremy Hunt delivered an autumn statement announcing £30 billion of spending cuts and £25 billion of tax rises. 

The BoE warned that rates would likely rise less than expected because of what would be the longest recession in at least a century making rate rises less of a priority, while the latest forecast from the Organisation for Economic Cooperation and Development (OECD) said that the UK would deliver the worst economic performance of any G20 country except for Russia over the next two years. In the interest of balance, neither the BoE nor the OECD have a flawless record of success in such forecasts. But we believe UK equities remain cheap despite this year’s energy sector bounce and the overall skew to value. The UK has outperformed other developed markets this year but there is still a long way to go, particularly if the value rotation continues.   

Across the Channel, there was also news that pointed to inflation peaking. A slowdown in energy and services prices saw eurozone inflation falling for the first time in 17 months to 10% in November. European stocks were also boosted by a German business confidence report that exceeded expectations and spurred hopes of a milder slowdown in the continent’s largest economy. 

Reversion to trend 
Emerging markets equities and bonds enjoyed a particularly strong month, rebounding from a year of poor performance on hopes that China would loosen its Covid lockdown policy and with the US dollar sell-off relieving financial pressures on several countries. An emerging markets fund manager said Hong Kong, South Korea and Taiwan stocks dropped this year due to the reliance on China’s economy but Indonesia and India markets were showing resilience because of their domestic demand-driven economies. Indonesia is considered an inflation hedge and its benchmark has hit record highs recently. 

We are positive on emerging markets longer term and believe it will be one of several asset classes offering attractive potential as they revert to longer-term trend performance after a decade or so dominated by US growth stocks. We expect the strong economic growth trajectory, favourable demographics, governance improvements and risk premiums of emerging markets will bear fruit for the patient investor. 

The geopolitical news was also looking better in Asia as China’s Xi Jinping met both Japan Prime Minister Fumio Kishida at the Asia-Pacific Economic Cooperation forum and US President Joe Biden at the G20 summit in Bali. However, the Russia-Ukraine war grinds on. As one former ECB president commented: “Leaders of countries are either fire starters or firefighters – we have too many fire starters at the moment.” 

Understand common financial words and terms See our glossary

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.

The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Some of the Funds and Model Portfolios managed by the Multi-Asset Team have exposure to foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The majority of the Funds and Model Portfolios invest in Fixed Income securities indirectly through collective investment schemes. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the rate of interest. Bond markets may be subject to reduced liquidity. Some Funds may have exposure to property via collective investment schemes. Property funds may be more difficult to value objectively so may be incorrectly priced, and may at times be harder to sell. This could lead to reduced liquidity in the Fund. Some Funds and Model Portfolios also invest in non-mainstream (alternative) assets indirectly through collective investment schemes. During periods of stressed market conditions non-mainstream (alternative) assets may be difficult to sell at a fair price, which may cause prices to fluctuate more sharply.


This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.

John Husselbee
John Husselbee
John Husselbee has 38 years’ experience managing multi-asset, multi-manager funds and portfolios. Before joining Liontrust in 2013, John was co-founder and CIO of North Investment Partners and Director of Multi-Manager Investments at Henderson Global Investors.

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