Turbulent geopolitics, soaring inflation and tightening central bank policies have created a narrow and treacherous path for equity investors in 2022, leaving them with few options to diversify and balance their portfolios. The performance of the two most prominent asset classes in the world’s “safest” market shows just how challenging the environment has been. Since 1974, US equities and bonds have provided good levels of diversification. When equities have done poorly, bonds have risen to the challenge to compensate — and the other way around. Thus far, this year has been the only exception, with both equities and bonds suffering

Tensions between the US and China appear to be rising, with disagreements over North Korea and the possibility that Donald Trump will invoke national security concerns to slap tariffs on Chinese steel imports. But if the chances of a trade war have increased, equity investors remain unconcerned. In fact, our China Exposure Index (CEI) shows that US firms with exposure to China continue to outperform their rivals. We have revisited the way we construct our CEI; building on our existing methodology we have constructed two new CEIs – a broad one, containing firms of all sizes, and a narrow one,