The genial head of the Schroder Investment Solutions model portfolio service Alex Funk was in rather cautious form when Asset Allocator caught up with him recently to discuss the optimism which was flowering in some quarters.
Funk was reacting to the strong start to 2023 made by equities, with the FTSE dancing near record highs, and he remarked that while this optimism was rooted in investor expectation that inflation has peaked, "it needs to be remembered as well that economic growth needs to come through".
He said it was possible we get a soft landing in the US, while the big recession priced into Europe as a result of the energy mix may turn out to be smaller than expected due to the mild winter.
But Funk pointed out: "That is still a recession, and investors need to remember that."
Schroders' house view continues to be that there will be a recession in the US in the second half of this year, while Funk's view is that US equities are "still not cheap", despite the falls of 2022.
He believes Wall Street is "pricing in a soft landing, rather than a recession".
Where Funk is more positive is on emerging market equities, where he is modestly overweight. Emerging markets tend to do well when the US dollar is weakening, something which has been a feature of 2023 so far.
Funk is also slightly more positive on bonds, where he believes volatility has peaked.