‘Being consistent and not reacting to uncertainty’ 7IM’s Jaffar on quarterly model rebalance

by | Dec 7, 2022

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Salim Jaffar, Investment Analyst at 7IM comments on 7IM’s quarterly model rebalance

Quarterly review

The past quarter has been yet another volatile period for most markets, with a lot of economic and political events for investors to digest.

During August, global equity markets were flat to down, despite rallying slightly at the start of the month. Stocks took a plunge following Fed Chair Jay Powell’s largely hawkish comments at the Jackson Hole economic symposium. UK and European markets also struggled to deal with ongoing issues created by inflated gas prices.


The UK dominated the headlines in September as Queen Elizabeth II passed away and Liz Truss was chosen as the country’s new prime minister. Soon after her ascent, Truss’ chancellor, Kwasi Kwarteng, gave a market-shaking mini-budget. The expansionary (but unfunded!) nature of many of the policies announced led to a fall in confidence in the UK, leading to a sell-off in both equity and gilt markets.

October proved to be yet another busy month for markets and events. Liz Truss resigned, and Rishi Sunak took office as the latest UK PM. Across the pond, the S&P rallied a massive 8.1% over the month, despite some shaky economic data. Europe also performed well as large stimulus packages were announced in Germany. 

November proved to be a pretty good month for markets. The most recent US inflation print came in lower than expected, causing a wave of positive sentiment around a potential Fed pivot. Meanwhile, in China, the marginal easing of Xi’s zero Covid policy was taken as good news by markets.  


Looking ahead

Understandably, investors are starting to worry about what’s next for financial markets. However, economic data isn’t likely to stabilise until next year, so ‘sideways with volatility’ is the most likely scenario for the next few months.  

Going forward, we believe four key factors will be at play:  

  1. A global manufacturing downturn is unavoidable… but the service sector should be resilient 
  2. Inflation will fall eventually… but the short-term outlook is less clear 
  3. Central bankers will remain under pressure… so the interest rate outlook will change frequently 
  4. Corporate profit margins have peaked… but most companies will keep growing earnings 

As ever, being consistent and not reacting to uncertainty is key. 

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