Monthly Portfolio Update: How Much Is Priced In?

The economic outlook continues to deteriorate, geopolitical risks have increased, and every indicator in our recession checklist will flash red by the end of the year. The Fed will keep hiking until monetary policy becomes restrictive. Markets are still too complacent: The risk premium is very low, option prices show no sign of capitulation, and profit estimates remain too optimistic. Emerging markets ex-China equities are starting to look attractive. Not only are they trading at cheap multiples, but their return on equity is at the highest level in decades.