Why strategists are still cautious when it comes to stocks

Frankfurt The first half of the year on the stock markets was a nightmare for most investors. Stock and bond prices have historically performed poorly. The global stock index MSCI World has collapsed by 21 percent so far, the global bond index from Barclays for government and corporate bonds with good credit ratings has lost almost 14 percent.

Nevertheless, according to strategists, the downturn is not over yet, especially for equities. The markets are “still not cheap enough to encourage investors to ignore the fundamentals,” says Luca Paolini, chief strategist at Pictet Asset Management.

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Fundamentally – that is, with a view to the economy – the situation looks really bad, he warns. A recession in Europe is becoming increasingly likely given the combination of rising inflation, supply chain bottlenecks exacerbated by the Ukraine war and the threat of a gas embargo.