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Weekly Investment Outlook

Gaurav MehraManaging Director and Senior Partner - Head of Macro Trading

21 June 2022

Decisive's Head of Macro Trading, Gaurav Mehra, and Head of Fixed Income, Hicham Hammoud, share their market views: 

  • The most anticipated recession in 20 years 
  • Energy prices at a peak
  • Time to consider an allocation in Bitcoin 

The biggest perceived risk going into H2’ 2022 is that of a recession. However, there are indicators in the market suggesting it is perhaps too premature to think of a recession. 

The World Purchasing Manufacturing Index (PMI) currently demonstrates global expansion, employment, and disposable incomes remain elevated, and debt levels are contained. We would need to see these indicators deteriorate significantly in the coming months to conclude that the risk of a recession is imminent.

As China reopens for business following lockdowns and is supported by a reduction in US tariffs, economic growth - albeit at a slower pace - should stay positive going into the second half of the year. 

China starting to rebound coupled with peaking oil prices bodes well for overall risk appetite. Institutional flows as measured by the ‘Smart Money flow Index’ are beginning to buy back into the market which in turn should support equities. 

The oil market also saw an explosion in put volumes similar to what we saw in 2008 and which resulted in a sharp selloff in oil from $147/bbl. In addition, the Biden administration is also increasing pressure on US oil companies to assist with controlling prices. In the last weeks, energy prices have corrected 20 percent and are likely to have a positive impact on lowering inflation expectations.

All indicators are pointing to a potential opportunity to play a contrarian strategy going into the second half of 2022.  Over the weekend, Bitcoin dropped to its lowest level since December 2020.

As with previous cryptocurrency crashes, it is expected to be a temporary downturn and as history has shown could be an attractive time to consider adding one to two percent of Bitcoin as part of the overall asset allocation.