Limited upside potential in the medium term

At a glance

Economics

• Putin's invasion of Ukraine is weighing on the economy. Europe is hit much harder than the US.
• In the course of the year, the economy should recover from the shock and growth return.
• Potential commodity embargo (or Russian supply freeze) as a risk factor especially for German economy.

Equities

• After the war-related sell-off with high volatility, the recovery came recently. April seasonality is good for equities.
• Medium-term upside limited is amid inflation and downturn concerns. Regions with commodity exposure are ahead.
• We are positioning ourselves with only a small overweight in equities and remain tactically flexible.

Bonds

• Yields on safe government bonds still on an upward trend. Yet yield levels becoming increasingly attractive in the long term.
• No further escalation in Putin's war makes for tighter risk premiums. We remain cautious on credit for the time being.
• We are underweight bonds and prefer emerging market bonds. Duration: short.

Commodoties

• Gold defies more restrictive central bank policy. Growth slowdown and inflation support.
• Supply shortage pushes the oil price up. Prices are likely to fall in the short term only if demand collapses.
• War and decarbonisation support industrial metals. The wave of infection in China is only a temporary demand dampener.

Currencies

• The first war shock is behind us on the forex market. The currencies of the safe investment countries do not gain further.
• Difficult conditions for the euro. Regional proximity to the Ukraine-Russia war is also a relative burden factor in the longer term.
• The yen is under pressure. Rising interest rate differential burdens. Could highly indebted Japan cope with higher interest rates?