Volatility in currency markets can also be used to enhance returns of excess cash positions." "Against an uncertain and volatile backdrop, investors can explore using options to improve payoff structures and consider drawdown management strategies," he wrote. Haefele also advised investors to prepare for volatility. "An environment with inflation over 3% has historically been associated with an outperformance by value relative to growth stocks," he wrote. While Haefele believes that inflation will eventually ease, he expects it to stay above targets, at least in the short-term. "If these trends continue, we still expect the Fed to be able to slow the pace of tightening later this year and back away from hawkish rhetoric." 5 investing strategies to focus onĮven as recessionary fears loom, Haefele advised investors to focus on five specific areas to weather the storm.įirst, he recommended considering value-oriented strategies, including focusing on sectors like energy and markets like the UK.
"The latest uptick in inflation may set the stage for a swifter decline in coming months as consumers adjust spending patterns and year-over-year comparisons become more favorable," explained Haefele. He also cited an influx of workers into a cooling labor market as another factor that will sustain current levels of household spending. As this continues, he's optimistic that supply chains might finally have room to recover from the bottlenecks they've been plagued by since the beginning of the pandemic.
Haefele also pointed out that recent falling prices of goods like televisions and smartphones indicate a shift in consumer spending away from goods towards services. "Although we expect growth to continue to moderate, we do not anticipate a significant downturn this year," he added.
"Core CPI, excluding food and energy prices, continued its downward trend - falling to 6% in May, from 6.2% in April and a peak of 6.5% in March." "In our view, the easing of inflation has been delayed, rather than canceled," he wrote. But Haefele believes that by only focusing on the doom and gloom, investors may be missing the broader picture. It goes without saying that things don't look good for the stock market. Last Friday, the relationship between the five and 10-year benchmark Treasury yields inverted for the first time since March - an event that's preceded most major recessions in the past. "Meanwhile, distortions arising from the pandemic have been slower to clear, including in sectors such as autos," he added.īesides the stock market's decline, Haefele also pointed to the flattening yield curve as another sign of rising "We expect higher oil prices to be sustained, despite pledges from OPEC+ to step up production." "Elevated inflation has been lingering for longer than expected because of higher energy and food prices arising from the war in Ukraine," wrote Mark Haefele, chief investment officer of UBS global wealth management, in a June 13 note.
On Monday, stocks opened the week by officially nosediving into a bear market as investors priced in a highly aggressive 75 basis point hike at Wednesday's Federal Reserve meeting. Instead, Friday's catastrophic reading reignited fears of an accelerated tightening cycle, rattling Wall Street.
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