Increased risks of setbacks on the stock markets

At a glance

Economics

• US economy: soft landing instead of mini-recession, new momentum during 2024.
• Europe: Consumer purchasing power recovers, but industry and residential construction decline. Economy weak for now.
• Inflation declining, interest rate peak (almost) reached. Fed cuts rates from spring 2024, ECB keeps rates stable in 2024.

Equities

• Strong rise in bond yields weighs on equity markets. (Real) interest rate hike puts pressure on valuations.
• Ambitious earnings expectations and late effects of the tight interest rate policy make markets vulnerable.
• We are maintaining our moderate equity underweight. However, a countermovement after the recent weakness is possible

Bonds

• Safe government bond yields at year's highs amid higher long-term real interest rates.
• Increased interest rate volatility and uncertain Fed rate steps continue to argue for duration near neutral.
• IG inflows clearly positive for the year, HY - negative. Emerging market local currency bonds still preferred.

Commodities

• Gold suffers from strong dollar and high real interest rates. Only a turnaround by central banks offers potential.
• Oil with recovery due to more pronounced supply deficit. Catalysts increasingly materialised after strong rally.
• Industrial metals remain cyclically sensitive but benefit from low inventories and strong "green" demand

Currencies

• The US dollar is benefiting from the comparatively positive economic data and the geopolitical crises.
• EUR/GBP continues to fluctuate around the 0.86 mark. The somewhat more stable political conditions are stabilising the pound.
• Like the US dollar, the Swiss franc is benefiting from the geopolitical crises.