More cautious into the summer

At a glance

Economics

• USA: Bank quake triggers mild credit crunch and sends US economy into mild recession; recovery in 2024.
• Europe: Domestic demand picks up, moderate growth in 2023, strong recovery after end of US recession in 2024.
• Bank quake = US interest rate peak. Fed cuts rates from end 2023; ECB tightens, ECB rates remain high in 2024.

Equities

• Equities have recently been volatile and moving sideways. Q1 reporting season provided support, while recession concerns weighed.
• Under the surface, investors are acting more sceptically. Cyclical stocks were the relative losers.
• We have increased our equity underweight in light of increased risks (debt ceiling, credit crunch) and valuations.

Bonds

• Government bond yields in sideways trend. Recession concerns compensated for the rise in key interest rates.
• Financial bonds were only able to shake off the bank worries temporarily. US high-yield bonds also under pressure.
• We are now only slightly underweighted in bonds and plan to gradually increase our bond positions.

Commodities

• Gold benefited from banking and recession worries. All-time highs within reach. Upside limited without interest rate turnaround.
• Crude oil prices are increasingly pricing in a recession, despite solid oil fundamentals. We remain optimistic in the medium term.
• Industrial metals defy the economic worries. Short-term potential is limited. Long-term upward trend intact.

Currencies

• EUR/USD is fluctuating around the 1.10 mark. In the course of the year, the euro exchange rate should continue to rise.
• The pound is gaining some momentum after a long lull. The euro is moving back towards 0.85.
• The franc remains very strong. EUR/CHF is trading below parity. The upside potential for the euro is moderate.