Horizon Handout April 2022

Economics:

• Russia invasion delays recovery. Uncertainty and higher prices weigh on economy.
• Price increases continue. Energy and food prices as drivers. Several months of stagflation loom.
• Central banks forced to reverse course. Moderate tightening of monetary policy implemented.

Equities:

• Negative investor sentiment and low positioning have supported equities recently.
• Non-fundamental investors are likely to add to equities as volatility falls. Fundamentally, however, the tailwind is weakening.
• We had increased our equity weighting in the wake of the sell-off, but now see only limited upside potential in the short term.

Bonds:

• Safe government bonds continue to lose ground beyond temporary hedging demand. Emerging markets attractively valued.
• In the medium term, we see potential for corporate bonds due to reduced supply and after valuation correction.
• We are underweight bonds and remain overweight emerging market bonds. Duration: short.

Alternative investments / commodities:

• Russian oil is still flowing to the West. However, supply is already tight. Prices and volatility are likely to remain elevated.
• Gold benefits from all kinds of uncertainties. Rising real yields slow it down, but are less dangerous with a restrictive Fed.
• Industrial metals markets benefit from high oil and gas prices. The decarbonisation trend accelerated with war.

Currencies:

• Safe-haven currencies (US dollar, Swiss franc) are in demand again due to Russia-Ukraine crisis.
• The euro recovers slightly from its lows of 1.08 US dollar per euro and 1.00 Swiss franc per euro.
• For the euro, the way up is rocky. Geographical proximity to the crisis region is a burdening factor.