Horizon Handout November 2023

Economics

• Germany is at the bottom of the table in terms of growth in 2023. Economic recovery postponed to second half of 2024.
• The USA is likely to achieve a soft landing. The US Fed is refraining from further interest rate hikes for the time being.
• The disinflationary process continues. Central banks are close to or have already reached the terminal rate.

Equities

• Global equity markets fell across the board recently. Defensive stocks ahead of cyclicals. Large caps ahead of small caps.
• Valuations have fallen recently, but earnings estimates for 2024 remain very ambitious. Fundamental potential limited.
• Low equity ratios of discretionary and systematic investors offer at least chance for small year-end rally.

Bonds

• Yields on 10-year US government bonds are currently at their highest level since 2007 at just under 5%.
• Risk premiums in the IG area continue to be attractive. The widening of HY spreads has begun.
• Continued interest rate volatility in US Treasuries and geopolitical uncertainty weigh on emerging market bonds.

Alternative investments / commodities

• Oil defies weaker demand thanks to escalation in the Middle East. Short-term potential limited, medium-term supply tight.
• Gold also benefits from the Israel-Hamas conflict, although yields have risen further. Further potential only with Fed turnaround.
• Only industrial metals suffered from lower risk appetite. Demand in the West weakens, but stable in China.

Currencies

• Sluggish growth is weighing on the euro exchange rate. For the time being, the upside potential is very limited.
• The US economy is defying the tight monetary policy. In addition, the US dollar is in demand due to geopolitical risks.
• The Swiss franc is currently benefiting even more from the political tensions than the US dollar.