Horizon Handout September 2023

Economics

• Germany is sliding from winter recession into stagnation. Recovery expected in spring 2024.
• The US seems to have achieved a soft landing. The Fed is therefore unlikely to lower interest rates as much in 2024.
• Inflationary pressure continues to decline (disinflation). Central banks are near or have already reached the interest rate peak

Equities

• Correction on the equity markets over August. Analysts have further revised earnings estimates downwards.
• Valuations only slightly lower after correction. High interest rates are likely to weigh on high valuation levels.
• We maintain our equity underweight. Increasing potential for disappointment poses risk for a major setback.

Bonds

• Interest rates on safe government bonds rose recently. US government bonds under pressure due to flood of new issuance.
• We are neutral in duration in view of the continuing uncertain interest rate policy and interest rate volatility.
• Corporate bonds with slight spread widening. Local currency bonds in the emerging market segment continue to be favoured.

Alternative investments / commodities

• Production cuts by the Saudis are still supporting the oil price, but supply and demand headwinds are increasing.
• Gold suffers from real interest rate rise and strong US dollar. Low investor positioning is potentially a positive signal.
• Wave of poor economic data weighs on industrial metals. Downturn is priced, but stocks remain tight.

Currencies

• The weak economy in the eurozone is weighing on the euro rate. There is only moderate upward potential in the short term.
• The US dollar, on the other hand, is benefiting from the surprisingly robust economy and is gaining ground against the euro.
• No news on the Swiss franc: it is and remains bearish. EUR/CHF is falling towards 0.95 again.