Economics:
- Pandemic severity is easing thanks to Omicron variant. Russia-Ukraine crisis delays recovery.
- Inflation remains at a high level. As the year progresses, inflation will fall less than hoped.
- Central banks are forced to turn around. Will the ECB follow the Fed and the BoE? First interest rate step probably in 2022.
Equities:
- First the interest rate concerns and now Russia are weighing on stock markets. EM equities are holding up comparatively well.
- Silver linings are the very pessimistic sentiment, already priced risks and the still good economic outlook.
- We remain positioned for a recovery with a slight equity overweight, even though the market is likely to remain volatile.
Bonds:
- Government bonds are in demand again as a safe haven. Increasing flattening of US yield curves.
- High-yield bonds now offer higher narrowing potential. Emerging market bonds with attractive yields.
- We are underweight bonds and remain cautiously positioned on credit risk. Duration: short.
Alternative investments / commodities:
- Russia-Ukraine escalation dominates energy markets. Brent is at over USD 100 per barrel. Gas prices spike.
- Gold is in demand and recently decoupled from real interest rates. Upside potential is limited in the medium term.
- Industrial metals markets are in the crossfire of Russia. Strong long-term increase in demand are still in sight.
Currencies:
- Safe haven currencies (US dollar, Swiss franc) in demand again due to Russia-Ukraine crisis.
- The euro gives back its gains resulting from ECB President Lagarde's press conference.
- For the euro, the way up is rocky. The ECB would have to tighten to boost the euro exchange rate.
