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Hello and welcome to the June episode of Monthly 
Market Insights. I'm Phil Attreed, Barclays Head  

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of Wealth Specialists. And as usual, I'm joined 
by Will Hobbs our Chief Investment Officer.  

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Now, Will, it's been another turbulent month 
across investment markets and whilst I'm sure  

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it's very stimulating for the investment teams 
in their day-to-day work, investors I think are  

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probably looking forward to the episode where 
I'm going to be able to stop saying that.

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100 per cent, Phil. I can't say it's going to 
come anytime soon, I'm afraid, but yes, I agree.

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I get that feeling as well. But anyway, 
Will and I are going to have a go as usual  

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unpicking what's going on in the world. Also 
what the path ahead might look like and so hot  

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topics really continue to be about oil, inflation, 
central banks, and I suppose a little bit more  

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about the hunt for stock and 
bond opportunities that might be  

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out there particularly at current levels. So, 
Will, could you set the scene for us if you can?

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Phil, that's not easy question actually more and 
more difficult than usual. I'll try and do like a  

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brief world tour because each region is facing its 
own set of quite individual challenges some of the  

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same ones as well, but with quite individual 
toolkits as well. So if you start with the US  

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because that's still by miles the most important 
for us as we know in terms of the outlook for  

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investment markets. If you start there, the good 
news is that the data is okay. The economy is slowing,  

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but you want that to be the case. That sounds 
perverse but as we've explained before this is  

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what central bankers are trying to achieve. This 
is what mostly people want to achieve in order to  

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try and reconnect aggregate demand with aggregate 
supply so that you get this inflationary pressures  

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under control again, but, they need to cool demand 
for everything basically, for workers, for goods,  

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for services. But incoming economic data, the 
latest batch of data suggest that the US economy  

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has quite a bit of cooling to do before the 
central bankers will feel relieved enough to stop  

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trying to get interest rates up at such a sharp 
level. Europe has a job to do too on this front,  

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in terms of that inflationary story. That's the 
same thing really at work for somewhat subtler  

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different reasons but they've got obviously the 
added complication of the unfolding tragedy in  

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Ukraine and proximity there and everything that's 
going on there obviously creates a much more  

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uncertain outlook for the European economy. If you 
think about if the gas supply which still could  

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be cut off that plunges Europe into an immediate 
economic darkness and that's not quite foreseeable  

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very easily calculable in terms of the odds that 
that might happen. So you want to be wary of  

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overconfidence there. In China, they're continuing 
to, the policymakers continue to play ‘Waco mole’  

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against Omicron which as we know is a much more 
transmissible variant, it's proving difficult as  

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the news from Shanghai this week suggests and 
there you've seen a very sharp deterioration  

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in economic activity because of that battle and 
that's made things very difficult in the short  

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run there. Further out, you should see a bounce 
back, activity inevitably will bounce back but  

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we've said before that the outlook for China is 
difficult as well. It's like I say, it's really  

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very different outlooks and different regions and 
the big story on the consumer side is this excess  

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savings pile that we've talked about before: how 
will that be deployed to what extent will it be  

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deployed and region to region? In the US it's 
perceived to be a bit more evenly distributed  

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across households and therefore maybe a bit more 
likely to be deployed and the latest spending data  

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showed that that was a little bit the case. 
They're dipping into their excess savings.  

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That's a little bit more questionable in Europe, 
UK as well. The perception here is that it's a  

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bit more unevenly distributed, more clustered in 
the top 40% by income distribution and that has  

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a different outcome in terms of what you would 
expect to be spent, if that all makes sense.

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It does indeed. You made reference a 
couple of times there but the big question  

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at the moment appears to be when we're likely to 
see the friendlier side of central bankers again.

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Yes, it'd be nice wouldn’t it? It feels a long 
way away right now. It's amazing to think,  

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if you look at this year from a little over 
a year ago and you look at what markets and  

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most were expecting at that stage and 
forecasting for 2022, it was really about  

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central bankers sitting on their hands for 
much of it, still in nurture mode, trying to  

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nurture the economy back from the blows of the 
pandemic. And yet you fast forward to today and  

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you have got quite the opposite; you are already 
in the US deep into rate-rising cycles, you've got  

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coming in the US, the next few meetings are 
expected to be again chunky rate rises. They’re  

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going to be a good deal higher by the end of the 
summer. The question mark for investors, like you  

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say, there is: when do those central bankers not 
just stop raising interest rates, but when do they  

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change their communication a little bit? That will 
be the thing for investors to watch. There’s not  

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much sign of it at the moment and you want to be a 
little bit wary, the energy prices are now pushing  

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out some of those expectations with regards to 
the plausible peaking inflation even in the US.  

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So it's a very complicated backdrop there. 
I suspect a tough summer ahead. That's the  

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current expectation. That could change, like I 
say, but that's our current base expectation.

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And I suppose with that in mind, it'd 
be pretty tempting to certainly wait  

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until making any substantial increases to stock 
markets to equity exposure. Would that be fair?

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Yes, so it's interesting isn't it? Because a lot 
of people will look at pullbacks of the size  

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we've seen and look at it and say that's naturally 
tantalising. If you look on a probability basis  

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you look at the size of the pullback relative 
to historic pullbacks you would say that  

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buyers would get interested. We would say 
it's not as easy as that really, the outlook as 

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I've described is sufficiently complicated to be 
relatively low conviction. That's reflected in our  

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Tactical Asset Allocation book; there's a batch 
of short-term positions the team focuses on to try  

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and add those little performance cherries here 
and there to the overall SAA performance cake,  

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the Strategic Asset Allocation cake. But what you 
can see there is that the book is what's called  

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relatively flat. We're not, there's not massive 
positions at the moment. The team is scouring  

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the world for opportunity. But at the moment 
it's discretion is the better part of valour.  

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Like I say the outlook for central banking and 
inflation, it's so uncertain at the moment and  

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it is very, it's dictating, it’s a really 
strong market influence at the moment that  

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inflation story and the uncertainty that 
surrounds the short-term outlook there  

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should mean that for the moment anyway, we're 
more cautiously positioned in that tactical book.

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Yes, not a time to be too bold just yet. But I 
guess one positive to take out of the start of  

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the year and some of the moves that we've seen 
both in stocks and bonds is that the return  

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prospect I suppose maybe for the years ahead 
maybe look a little bit more attractive than  

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they have done in the past. I think you'd made 
reference that a little bit in what you just said.

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Yes, this is a little bit, in these very difficult 
times, I guess this is a weird thing,

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but this is an investment video, isn't it? But 
yes, you're right. I think your expected returns  

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probably are a little bit higher than they were. 
The backup in bond yields is helpful there. Stocks  

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have fallen some distance in some corners as 
well. So there's less froth and we talked in  

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our outlook actually about the need for some of 
that froth to get blown off markets at some stage.  

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As always when it comes it's more shocking than 
writing about it in advance or speaking about it  

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in advance. But yes, the expected returns are 
higher and that really is always the finishing  

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point for our conversations. You must be so 
bored of hearing it by now but hopefully it gets  

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through. Repetition, I hope, and conviction, it's 
my personal belief as well, is that there's no  

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point in getting too caught up on what's going on 
right now in a very confusing tactical backdrop.  

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The returns to longer term investments that's just 
about making sure you're fully invested all the  

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time. Don't worry too much about what's going 
on in the short term. These are fluctuations.  

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Your entry point right now as in days and 
months won't make a big difference in terms  

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of your long-term returns expectation. Those 
short-term tactical tweaks, that's more about  

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adding basis points here and there. Like I say 
the meat and drink of your returns is just going  

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to be from being invested and having faith that 
over the long term, humankind will continue to  

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invent new stuff and get better at using that new 
stuff, productivity. And that was what will drive  

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your returns and as you know, I have strong 
faith that will be the case, we can go through  

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that on another podcast again, but I think 
that's the major point to take away as usual.

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There’s always certainly interesting things 
going on in the world. Will, thank you as always,  

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very insightful and thank you our viewers and 
listeners for joining us. If you would like to  

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keep in touch with our views over the course of 
the next month between episodes, please do seek  

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us out on our podcast Word on the Street where 
we share all of our latest views on developments.