In short:

·        A clearer outlook for the bond market is helping risk assets

·        Will the China reopening fuel a global economic rebound?

·        Our emerging market equity underweight has been closed

As the new year begins, it is time to take stock of recent developments and look forward to what the year might bring. The past year has been far more eventful than any of us could have imagined at the end of 2021. It started with Russia’s invasion of Ukraine. Inflation rose to levels that were higher than anticipated. Central banks raised rates far more rapidly than anyone expected. Bond markets suffered their worst performance in since the 19th century.

This question keeps being asked by the media and asset managers. In the past year, the asset manager of one major US bank published a note asserting that “China is still investable”, while the investment banking arm of the same bank asserted that China is not. One large ETF provider helpfully created an “emerging markets ex-China” ETF to cater to investors who do not believe China is investible. Banks and asset managers tend to answer this question differently depending on the extent to which they are invested in the Chinese market.