Exploring the economics of Europe’s energy crisis
Surging energy prices and faltering gas supply could trigger an economic shock for Europe. Learn more about the investment implications of the looming energy crisis.
Anticipating subtrend growth well into 2023, we remain neutral duration and overweight cash. We underweight equities, expecting meaningful earnings downgrades. We take a neutral stance on credit, with a clear preference for investment grade over high yield.
Though global equity markets are already down more than 20% this year, our portfolio managers remain cautious. In a downturn, quality matters, in managements and balance sheets.
Recession is our base case scenario, at 50%. We raised the likelihood of Crisis to 15% while lowering Sub Trend Growth to 30% and Above Trend Growth to 5%. We’re using market rallies to reduce our interest rate exposure and credit risk. Our best idea: high quality, short-dated cash flows.