“SCB-Julius Baer Securities Co., Ltd.” (SCB Julius Baer), a joint venture company between first Thai bank Siam Commercial Bank and Switzerland’s leading global wealth management company Julius Baer, recently held an exclusive “Market Outlook Mid-Year 2022” seminar for Ultra High Net Worth Individuals (UHNWIs), where they discussed key factors affecting investment in the second half of the year amid uncertain global economic situations and current inflation near a 40-year high. SCB Julius Baer believes that rising energy costs are due to the Russia-Ukraine conflict and not a supply crisis. A recession indicator released by Julius Baer remained at 20%, indicating that investors should diversify their risk portfolios. The health care sector, Swiss stocks, Asian dividend equities, and energy transition themes continue to merit a bullish outlook, while the attractiveness of profitable and cash-flowing technology companies remains unchanged. Historically, real assets including commodities and real estate have performed well in an inflationary environment.
Speaking about the 2H22 economic outlook, SCB-Julius Baer Securities Co., Ltd. Chief Executive Officer Lalitphat Toranavikrai said, “According to Julius Baer’s analysis of the world economy for the second half of 2022, the global economy faces inflation approaching its highest level in more than four decades, reflecting severe investment pressure this year. During periods of high inflation, we believe that real assets such as commodities and real estate provide favorable returns. While energy prices are elevated due to Russian-Ukrainian geopolitical issues, the US is replacing oil exports and the global oil market has the means to buffer a supply shortfall from Russia. In short, we do not think that the world is about to run out of oil. It is more of a price crisis as a result of the war, rather than a supply crisis. Over time, we think that oil prices will moderate downward.”
The hot topic is whether we will see a recession looming over the horizon – Julius Baer’s proprietary indicator currently pins that probability at around 20%. Historically, the indicator had to hit above 60% for a recession to materialize. U.S. employment numbers began to surge again after more than two years of economic stagnation caused by the outbreak of COVID-19, and people are beginning to travel once more. These elements, together with the increased supply of cash in the US household sector, imply that the economy of the United States will regain its former strength. The S&P 500 briefly touched bear-market territory in mid-June, as characterized by a 20% pullback from the peak. On a related note, the technology sector has been hit hard this year, but despite near-term headwinds, the sector offers investors promising growth prospects. We have a preference for profitable companies with strong cash flows instead of early-stage technology players.
“Given the current uncertainties, we believe there are still investing opportunities based on the aforementioned considerations. Healthcare, Swiss stocks, Asian dividend stocks, and energy transition themes are some of the sectors/regions that we are optimistic about and that should be considered for a diversified portfolio. SCB Julius Baer has an Expert Advisory team, comprising knowledgeable investment professionals with the same level of wealth management expertise as Julius Baer, ready to provide advice to key clients to assist them in managing their portfolios with flexibility to create long-term sustainability,” concluded Lalitaphat.