Horizon Handout May 2022

Economics:

• Russia invasion delays recovery. Uncertainty and higher prices weigh on the economy.
• Price increases continue. Energy and food prices are drivers. Several months of stagflation loom
• Central banks are forced to reverse course. Monetary policy is tightened - in Europe, however, only moderately so far.

Equities:

• Markets were again burdened by recession concerns due to rising interest rates and China risk as well as the Putin war.
• Companies can surprise positively in the current Q1 reporting season. However, the outlook is becoming more difficult.
• A challenging global situation let us remain cautious. However, the lows in sentiment and positioning should be supportive

Bonds:

• Government bonds burdened by restrictive interest rate policy of central banks. Renewed steepening of the US yield curve.
• Risk premiums on corporate bonds have recently risen again. Spread narrowing in emerging market bonds.
• We underweight bonds and remain cautiously positioned on credit risk. Duration: short.

Alternative investments / commodities:

• Oil embargo is imminent. However, supply is already tight. Prices and volatility are likely to remain elevated.
• Gold benefits from all kinds of uncertainties. Rising real yields slow it down, but are less dangerous with a restrictive Fed.
• Industrial metals temporarily weaker due to China lockdowns. Long-term supply shortage remains unaffected.

Currencies:

• The ECB remains hesitant. The euro will therefore probably remain under pressure until the ECB changes its key interest rate.
• The USD/EUR exchange rate has fallen to 1.05. The Dollar is benefiting from the prospect of rapidly rising rates.
• After initial gains at the beginning of the war, the yen has dropped significantly. The BoJ is stuck in a low interest rate trap.