Economics
- The worst-case scenarios seem to have been averted. Financial markets are already looking towards recovery.
- Inflation rates seem to have peaked. Nevertheless, inflation remains far above central bank targets.
- The European Central Bank and the US Federal Reserve are tightening monetary policy further, but with smaller steps.
Equities
- The early-year rally stalled with strong US labour market data and bond yields rising again.
- The markets are unlikely to experience much of a tailwind from the earnings side, while valuations have risen again.
- Technically and fundamentally, the air has become thinner. We have therefore reduced equities to a slight underweight.
Bonds
- Rise in yields on safe government bonds. 10-year US government bond yields now back at 3.9%.
- EUR corporate bonds remain attractive. Local currency bonds preferred in EM.
- We have recently reduced the underweight in bonds and added short-dated EUR bonds.
Alternative investments / commodities
- Oil trades volatile sideways. Demand recovery in China slower than expected. Producers remain restrictive.
- Strong US labour market ends gold rally. Fundamental potential limited. Macro risks remain numerous.
- Rising inventories of industrial metals. Supply continues to struggle with production shortfalls. Long-term trends intact.
Currencies
- The euro should benefit from improved market sentiment and economic prospects over the course of the year.
- Higher risk appetite traditionally dampens the US dollar. Nevertheless, the US currency remains highly valued.
- The euro's upside potential against the Swiss franc beyond parity is limited.