According to AJ Bell Investment Director Russ Mould, the global markets are starting to witness some turmoil. The brewing crisis in the Chinese property market, the surge in U.S. bond yields, and the significant drop in U.K. retail sales are contributing to an increasingly challenging climate.

These Friday declines have added to the losses sustained earlier in the week, prompted by the minutes from the U.S. Federal Reserve’s last meeting. The minutes revealed that policymakers foresee “upside risks” to inflation and remain open to further interest rate hikes to ensure sustainable price growth.

This has resulted in a spike in U.S. Treasury yields, driving the 10-year yield to a 16-year high. Meanwhile, 10-year German bunds have experienced a rally, reaching their highest level since the collapse of Silicon Valley Bank in March.

Compounding concerns, Evergrande’s recent bankruptcy protection filing has intensified worry about China’s real estate market. Notably, Country Garden’s decision to suspend payments on some bonds earlier this week has further escalated apprehensions.

Barclays Head of European Equity Strategy Emmanuel Cau suggests that the markets are facing the perfect storm. The surge in rates, deteriorating economic data in China, poor summer liquidity, and a lack of buyers have combined to create a challenging environment.

Cau acknowledges that the previous positive outlook on China may have been overly optimistic due to the absence of decisive policy action since the Politburo meeting in late July. He alerts investors that sentiment on China is unlikely to reverse sustainably unless large-scale fiscal stimulus is implemented.

Given the circumstances, Barclays recommends a “barbell” investment approach. This entails allocating funds to both cyclical and defensive stocks while highlighting the importance of a “value tilt.” A value tilt involves favoring stocks that are perceived to be undervalued in relation to their financial fundamentals.

In addition to these concerns, U.K. retail sales experienced a 1.2% decrease in July, far below the consensus forecast of a 0.5% drop predicted by economists.

Next week, attention will turn towards the Fed’s Jackson Hole symposium, as well as flash PMI (purchasing managers’ index) readings from major economies. The U.S., in particular, is of great interest due to its continued surprising growth.

Despite market participants acknowledging more of the risks highlighted by economists in recent months, David Roche, president of Independent Strategy, warns that there could be further decline once all the geopolitical and macroeconomic risks are fully priced in. Roche believes that the correction will come as people realize that lower inflation negatively impacts profits and take into account various issues ranging from Latin America to China.