Page 9 - PSK Q2_2022_Thomas Ilinkovski

demand as post covid reopening
continued.

Looking forward
Weakening economic signals along with
stubbornly high inflation present a
conundrum for central banks, giving them a
very small window in which to address
inflation whilst increasing the chances of a
policy misstep (ie. over tightening). The
Russia/Ukraine complex remains a
complicating factor both in terms of
geopolitical risks and ongoing supply
issues, whist it remains to be seen whether
China is done with their covid-zero policy
framework.

In contrast, economic conditions remain
reasonable (outside of Europe), and
corporates and households did come into
this environment from a position of strength
– i.e. high household savings rates, two
years of strong equity and property prices,
full employment and rising wages, and very
strong corporate balance sheets following
two years of raising capital relatively
cheaply and extending debt maturities
whilst locking in very low borrowing rates.
With rising costs of living starting to hit
home and the market pricing significantly
more rate rises from most central banks
before year end, upcoming company
reporting season will be key to watch with
forward guidance for earnings ever more
important. Investors and economists will be
looking for signs of peak inflation to gain
more clarity, and comfort, on the central
bank rate hike path whilst central bankers
attempt to engineer a soft landing which is
becoming increasingly difficult by the day.

Chris Lioutas
PSK Private Wealth -
Chief Investment Officer