Horizon Handout July 2023

Economics

• Germany and the Eurozone now with technical winter recession after downward revisions of GDP data.
• Inflation falls more than expected in the eurozone and the US. In the UK, inflation remains very stubborn.
• ECB, BoE and Fed will tighten further. The wording of the ECB and Fed has been surprisingly hawkish lately.

Equities

• Profit growth expectations close to zero are probably realistic for 2023. 2024 should be better.
• The threat of liquidity withdrawal should cap valuations in the coming months.
• We see an increased risk of a setback in Q3. However, the downside potential is likely to be limited due to positioning.

Bonds

• Safe government bonds offer greater earnings opportunities in the US and the UK than in Germany.
• For European corporate bonds, we prefer short-dated securities from the investment grade segment.
• For emerging markets, local currency bonds remain our clear favourites. Our bond weighting is close to neutral.

Commodities

• Oil price development decoupled from fundamental data. Recovery still pending despite positive developments.
• Gold has moved sideways in the last month. Fed turnaround needed for sustained upward trend.
• Industrial metals continue to fall after brief recovery. Inventories low, demand rising due to energy transition.

Currencies

• After a temporary setback, the euro can gain again after the central bank meetings.
• The interest rate decisions by the Fed and the ECB were as expected. However, the outlook was surprisingly hawkish.
• The Swiss franc remains highly valued. Meanwhile, the inflation rate has almost fallen back to 2%.