CIO Insights 3Q22: Rising Above Inflation

Amid continued supply chain disruptions and geopolitical instability, DBS CIO Hou Wey Fook presents the importance of building a high quality, globally diversified portfolio to rise above inflation
Chief Investment Office23 Jun 2022
  • Fed rate hikes to continue unless supply chain disruptions and geopolitical tensions lets up
  • Big Tech demands strong earnings while energy, commodity, and real estate rides inflation tailwinds
  • Prefer Investment Grade; Underweight Emerging Markets due to rising default risks
  • Amid heightened volatility, focus on quality portfolio, growth drivers, and risk diversifiers
  • China continues to offer favourable risk-reward
Photo credit: Unsplash

Dear valued clients,

Clearly, the elephant in the room for financial markets is the soaring inflation rate. Until we see some normalisation of supply chains, inflation will continue to be a bugbear.

The Fed has responded with two rate hikes and has articulated that more are to come. It is worth noting, however, that much of the impending hikes have already been priced in – as shown in the 2Y Treasury yield spiking from 0.75% to above 3.00% from the beginning of the year.

Barring further deterioration on the geopolitical front, we are hopeful for a better showing of risk assets in the second half of the year.

In 3Q22, we reaffirm our preference for securities of high quality. Seek companies with wide economic moats. The bifurcation in performance between Big Tech versus emerging, yet-to-be profitable ones is evidence of this flight-to-quality.

Our Overweight China call has panned out and continues to offer favourable risk-reward.

On fixed income, investment grade bonds stand out as an attractive alternative to holding deposits.

In this edition of CIO Insights, we initiated commodity investing as an inflation winner and highlight how companies that ascribe to “Content is King” rise to have strong economic moats.

We believe these insights are the gateway to a resilient portfolio and will empower you to ride through these inflationary times.

Hou Wey Fook, CFA
Chief Investment Officer

Download the PDF to read the full 3Q22 CIO Insights report


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