Horizon Handout January 2022

Economics:

• The omicron variant brings new uncertainty. There is, however, enough purchasing power for a recovery in spring.
• Inflation keeps rising in the US, in the UK, in the Eurozone and in Germany.
• The upward pressure on prices is forcing central banks to turn around. The Fed and the BoE are leading the way, while the
  ECB remains hesitant.

Equities:

• Corporate profits should rise next year, but growth rates are expected to decline.
• Valuations are likely to decline slightly due to rising bond yields and less liquidity support.
• We see limited upside potential for equities in 2022, despite no alternatives.

Bonds:

• Safe government bonds are likely to remain out of favour and we expect losses.
• For European corporate bonds, we focus on short maturities with relatively high yields.
• For emerging market bonds, we are wary of high duration, but attractive valuations offer hope.

Alternative investments / commodities:

• COVID-19 brings oil prices down again. There’s short-term recovery potential if infection rates subside.
• Gold rises following central bank meetings. Potential rising real interest rates remain the biggest headwind.
• Industrial metals should gain when the economy picks up again.

Currencies:

• The euro seems to have found its trough against the US dollar. The latest ECB decision does not weaken the euro.
• The BoE is tightening. However, the interest rate advantage over the euro is priced in so the sideways movement continues.
• The Swiss franc is very strong. Part of the franc's strength can be explained by the much lower level of inflation.