Schroders PLC · LSE:SDR
Schroders — Investment Symposium 2022
19 slides from Schroders's conference presentation, March 2022
Slide 1: Investment Symposium 2022: Global macroeconomic outlook
Investment Symposium 2022 Global macroeconomic outlook David Rees, Senior Emerging Markets Economist March 2022 Marketing material for professional investors or advisers only.
Slide 2: Agenda
Agenda 01 Global forecast overview 02 US inflation and the Fed 03 Russia and other risk scenarios 04 Light at the end of the tunnel in China? 05 Resilience in Emerging Markets 06 Conclusions
Slide 3: Strong global growth but with higher inflation
Strong global growth but with higher inflation In contrast to the post-GFC, developed markets are in the driving seat Contributions to World GDP growth (y/y) Contributions to World inflation (y/y) Forecast Forecast 8 6 5.5 5.6 5.7 4.7 4.7 6 5.0 5.1 5 3.8 3.7 3.8 3.5 3.4 4 3.0 3.1 3.3 3.3 3.0 2.7 3.0
Slide 4: An unbalanced recovery, particularly in the US
An unbalanced recovery, particularly in the US Supply-demand imbalance is driving inflation Retail sales (volume) Industrial Production 100 = 01/01/2020 120 120 115 110 110 105 100 100 95 90 90 85 80 80 75 70 70 2020 2021 2020 2021 Recession US Eurozone UK Recession US Eurozone UK Source: Refinitiv
Slide 5: US inflation expected to fall, but risks of second round effects
US inflation expected to fall, but risks of second round effects Strong labour market has supported wage growth Contributions to headline CPI Forecast y/y 8 35% 5% Hundreds 7 30% 6 4% 5 25% 4 20% 3 3% 15% 2 1 10% 2% 0 5% -1 -2 0% 1% 2016 2017 2018 2019 2020 2021 2022 2023 2006 2008 2010 2012 2014 20
Slide 6: Policy implications
Policy implications Fiscal and monetary policy will be less supportive in 2022 Base rate Value of assets in central banks' balance sheets % (Trillions of USD) Forecast 3.0 30 2.5 25 2.0 20 1.5 1.0 15 0.5 10 0.0 5 -0.5 -1.0 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 06 07 08 09 10 11 12 13 14 15
Slide 7: Risks to forecast skewed by stagflationary scenarios
Risks to forecast skewed by stagflationary scenarios Scenario analysis Scenario impact on growth and inflation Scenario probabilities Cumulative 2022/23 Inflation vs. baseline forecast +3 Stagflationary Reflationary +2 9% Supply side Consumers inflation re-leverage 59% 5% +1 Russian aggression 5% co
Slide 8: Problems in Russia can disrupt commodity markets
Problems in Russia can disrupt commodity markets Share of World Exports (%, 2020) Nickel and articles thereof Fertilisers Mineral fuels, mineral oils and products of their distillation Cereals Commodities not elsewhere specified Wood and articles of wood Iron and steel Natural/cultured pearls, preci
Slide 9: Europe is vulnerable to any further increase in energy costs
Europe is vulnerable to any further increase in energy costs Reliance on Russian oil and gas has already fed through to inflation Y/Y 5.5% 400 5.0% 4.5% 350 4.0% 300 3.5% 3.0% 250 2.5% 2.0% 200 1.5% 1.0% 150 0.5% 100 0.0% -0.5% 50 -1.0% -1.5% 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Slide 10: China: Growth continues to slow, consumption lagging
China: Growth continues to slow, consumption lagging Uptick in industrial production offset by weaker retail sales and FAI 2 Year Annualised Real Growth (%) 15 20 10 8 10 15 6 4 5 10 2 0 0 5 -2 -4 -5 0 -6 -10 -5 -8 -10 -15 -10 -12 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 2020 2021 202
Slide 11: Export growth set to weaken, real estate sector still soft
Export growth set to weaken, real estate sector still soft Slowdown in exports may pressure renminbi 50 56 160 40 54 30 140 52 20 120 50 10 100 0 48 -10 80 Any stabilisation and rebound in 46 housing sales would usually take 6–9 -20 months to feed through to activity – 44 60 perhaps longer in the fu
Slide 12: Light at the end of the tunnel as leading indicators improve
Light at the end of the tunnel as leading indicators improve Economic conditions soft at least until summer 30 22 25 20 20 18 20 25 18 16 16 15 14 20 14 12 10 12 10 15 10 5 8 8 6 0 10 6 4 4 -5 2 5 2 0 -10 0 -2 0 -2 -15 -4 2000 2003 2006 2009 2012 2015 2018 2021 2008 2010 2012 2014 2016 2018 2020 202
Slide 13: What does China's cycle mean for markets
What does China’s cycle mean for markets Still supportive of CGBs in the near term, the time for equities may be approaching 25 250 25 80 20 200 20 60 150 15 15 40 100 10 10 50 5 20 5 0 0 0 0 -50 -5 -20 -5 -10 -100 -10 -40 -150 -15 -15 -200 -20 -60 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2
Slide 14: EM external positions are relatively good – no crisis
EM external positions are relatively good – no crisis Balance of payments may deteriorate in net energy importing EMs 'Short-Term' Capital Inflows (4Q Sum % GDP, Latest) -200 3 6 Vulnerable BoP positions Romania Egypt -150 Chile 2 4 -100 1 -50 2 Colombia Turkey Hungary India 0 0 Thailand Philippines
Slide 15: EM central banks have hiked rates aggressively
EM central banks have hiked rates aggressively Growth expectations rolling over as tighter policy bites 60 15 6 58 10 5 56 54 5 4 52 0 3 50 -5 2 48 46 -10 1 44 -15 0 42 40 -20 -1 2005 2007 2009 2011 2013 2015 2017 2019 2021 1998 2001 2004 2007 2010 2013 2016 2019 2022 Net Number of Rate Cuts/Hikes o
Slide 16: Food and energy inflation to fall during 2022
Food and energy inflation to fall during 2022 Higher commodity prices and obvious risk % y/y % y/y % y/y % y/y 60 150 9 125 20 50 Based on futures 8 prices and 100 40 15 constant 7 exchange rates 75 30 10 6 50 20 5 25 5 10 4 0 0 0 3 -25 -5 -10 2 -50 -20 1 -75 -10 2000 2003 2006 2009 2012 2015 2018 2
Slide 17: Conclusions
Conclusions Solid growth Higher interest rates Russia/Ukraine A slowdown in global growth is The peak in inflation is in sight but Geopolitical tensions are a clear inevitable, but it should remain central banks will hike rates to risk to the outlook and much robust driven by developed ward-off upsi
Slide 18: Important information
Important information For professional investors and advisers only. The material is not suitable for retail clients. We define "Professional Investors" as those who have the appropriate expertise and knowledge e.g. asset managers, distributors and financial intermediaries. This information is a mark
Slide 19: Marketing material for professional investors or advisers only
Marketing material for professional investors or advisers only.