Global markets could be in a "calm before the storm" fund managers have claimed, although there are bright patches on the investment horizon.
Speaking in a webinar, Anthony Wills and fellow investment manager Scott Spencer, from the Columbia Threadneedle multi-manager team, said there was a "lot going on".
Wills said: "Geopolitics remains uncertain and there’s a lot going on. It feels maybe this is the calm before the storm.
"At the moment it seems corporate earnings data is holding up okay so far, and companies are good at beating expectations.
"However, we are watching closely to see what sort of consequences will be caused by the aggressive hiking cycle from the central banks have consequences.
"I would be very surprised if we do not see further issues."
The managers were providing a quarterly update on January-March 2023, a period which saw the demise of Silicon Valley Bank and Credit Suisse - events which shook markets and caused sentiment to turn more negative.
Nigel Green, chief executive of the deVere Group, commented: "This huge disconnect between stocks and bonds suggests that investors should brace themselves for significant volatility in global financial markets over the next few weeks.
"We could see a 10 per cent correction.
“We expect that we’re currently in the ‘calm before the storm’ phase."
Green added that a market correction is a natural part of the market cycle and can present major buying opportunities for long-term investors who are willing to weather short-term volatility.
Indeed, consensus forecasts of a "gloomy earnings season" have also rocked the ship, with McDonalds forecasting a recession.
Better-than-expected
However, there have been stronger-than-expected results from giants such as Alphabet, Google and Microsoft.
Moreover, as the GfK confidence indicator showed in April, sentiment around the general UK economy has improved significantly over the past four months.
According to Joe Staton, client strategy director of GfK: "The brighter views on what the general economy has in store for us, with April’s six-point rise cementing a 20-point improvement since January, could even be seen as the proverbial ‘green shoots of recovery’."
But while the CT multi-manager team said it was being more "cautious in our positioning overall", there were many areas where they had seen opportunities to position portfolios in the Navigator and Lifestyle ranges.
The team highlighted how allocations in the fourth quarter of 2022 towards fixed income had helped shore up performance while keeping the funds within their "expected volatility" in each strategy.
Spencer said that, within the Navigator range, there has been a strong bounce-back in the three years post-Covid.
Despite the market turmoil around contagion and consensus expectations of a US recession", in general, equity allocations had done well (see chart).
