This publication aims to provide an insight into the changing economic environment and importantly, how this has impacted financial markets and investments. Our Multi-Asset Solutions team at Santander Asset Management UK share their thoughts on the market outlook and how they have adapted investment portfolios to position our clients for the road ahead.

This publication aims to provide an insight into the changing economic environment and importantly, how this has impacted financial markets and investments. Our Multi-Asset Solutions team at Santander Asset Management UK share their thoughts on the market outlook and how they have adapted investment portfolios to position our clients for the road ahead.

Investor expectations of the path interest rates would take fluctuated during the first quarter amid mixed signals on whether inflation is easing. A banking crisis in March added to volatility, spurring uncomfortable questions regarding the health of the global financial system.

Encouraging signs emerged this quarter that inflation may be beginning to plateau. However, the overall picture for the global economy remains defined by stubborn inflation, and the interest rate rises central banks are implementing trying to contain it.

The third quarter began with a market rally in July, driven by investor hopes that inflation had peaked and a recession had been averted. However, this optimism began to falter by the middle of August as it became clear that stubborn inflation and large interest rate hikes may continue.

Global stock markets fell for a third month in October after a sharp increase in bond yields triggered volatility across financial markets.

Share and bond prices declined across a wide range of markets in September as investors came to terms with the fact that interest rates are likely to stay higher for longer as rising oil prices make it more difficult to reduce inflation.

Shares experienced their biggest drop in eight months and developed nation bonds delivered negative returns in August on worries that interest rates will stay higher for longer.

Stock markets rose in July amid expectations that US and European interest rate hikes are nearing an end and that the global economy will grow more than previous International Monetary Fund (IMF) forecasts suggested.

Stock markets rose in June as a slowdown in US inflation offered hope that the Federal Reserve is nearing the end of its interest rate hiking cycle, improving the odds that the world’s biggest economy will avoid a recession.

Debates among US lawmakers over whether to raise the debt ceiling – and in doing so potentially avoid a US debt default, which risks major economic damage – captured the attention of investors.

Although persistently high inflation remains a key concern for economists, stock markets in the US and Europe were able to make gains in April.

A banking crisis in mid-March sent volatility soaring as investors questioned the financial system’s stability and how central banks would continue their fight against inflation.

A resurgence in inflation reversed the optimism investors had shown earlier in the year, as the prospect that higher interest rates would remain in place for longer caused global shares and bonds to tumble in a volatile February.

After a 2022 that saw global stock markets experience their largest annual rout since the global financial crisis of 2008 and bonds endure one of their worst years on record, investors had some grounds for optimism in January 2023.

A two-month rally in global stock markets ground to a halt in December. This marked a fitting culmination to a year that was the worst for US shares since 2008, and the worst for European shares since 2018.

Investors experienced somewhat of a breather during November, as stock markets gained for a second month and bond prices rose. This is mainly thanks to the US Federal Reserve (Fed) indicating that the size of interest rate increases might be reduced, and US inflation showing signs of cooling.