Horizon Handout October 2023

Economics

• Germany's economy is out of step. The recovery is postponed until the second half of 2024.
• The USA will probably manage a soft landing. Will the US Federal Reserve take one last interest rate step?
• The disinflationary process continues. Central banks are close to or have already reached the terminal rate.

Equities

• Warning leading indicators and higher interest rates, USD and oil are likely to put pressure on optimistic earnings estimates.
• Deepening liquidity withdrawal is likely to cap valuations in the coming months.
• Increased risk of setbacks after sideways market in Q3. However, downside potential limited by investor caution.

Bonds

• High-rated government bonds promise positive returns, in local currencies especially in the Anglo-Saxon region.
• We like European corporate bonds defensively; at the short end, secure covered bonds offer similar returns
• In emerging markets, we favour the local currency segment and see corporate bonds ahead.

Alternative investments / commodities

• Fundamental starting position for oil is solid thanks to OPEC cuts, but headwinds increase after strong rally.
• Gold defies strong dollar and high real yields. However, falling interest rates are needed for sustained upside potential.
• Industrial metals fluctuate sideways. Rising "green" demand partially offsets economic weakness 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. The US dollar is benefiting and is trading at a higher level.
• It is the same old song for the Swiss franc: It is and remains strong. EUR/CHF is stable below parity.