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 joined LGIM’s London team in 2008, initially focusing on credit strategy before taking on the role of Head of Investment Strategy and Research, coordinating LGIM’s research from long-term themes to short term market drivers. He also chaired the monthly investment macro meeting for many years, a key input for portfolio risk across the active strategies. He relocated to Hong Kong in 2020, joining the LGIM Asia Board as a Director and was appointed Head of Investment Strategy, Asia, to help grow LGIM’s investment business across the APAC region. Ben started his career in 1999 as a credit strategist at Dresdner Kleinwort Benson in London, before performing the same role at both BNP Paribas and Lehman Brothers. Ben holds an MA in Mathematics from Queens' College, Cambridge University.

Ben Bennett