23 Jan 2023 1 min read

Chart of the month: asset classes pull a U-turn

By Ben Bennett

The biggest losers of last year's sell-off have made the biggest recoveries, but what's driven this reversal?


The chart above shows the post-October rally is largely a mirror image of the pre-October sell-off.

What does this mean? Either you think the fundamentals have indeed flipped – no more inflation issue, central banks have pivoted and recession risk has faded – or it’s just a temporary closing of positions as trades became stretched or people took profits.

Of course, it’s probably a combination of the two, but given our view that inflation will remain sticky in 2023, central banks are likely to be committed to getting it under control, and we think the balance of probability points to a recession in the US and Europe, we suspect it’s more positioning than fundamentals.

So, we would be inclined to expect another flip of the chart before long.

Ben Bennett

Head of Investment Strategy, Asia

Ben focuses on investment ideas and themes. He spends a lot of time on the 4Ds of fixed income investing: debt, deficits, demographics and deflation. This might be more than a little influenced by his first-hand experience of a credit crisis, having joined us from Lehman Brothers in 2008.

Ben Bennett