The air is getting thinner

At a glance

Economics

• US economy more robust than expected. Mini recession likely in mid-2023, soft landing possible. Upswing in 2024.
• Europe: Gas situation eases. Mild setback in winter, new upswing from summer. Inflation slowly declining.
• Central banks: Interest rates will peak in mid-2023. US Fed cuts rates from end of 2023, ECB rates remain high.

Equities

• Equity markets defend gains, but the air to the upside is thinner. Outperformance of European and value equities.
• Economic challenges and monetary policy are likely to cap earnings growth and valuations across the board.
• Risk-reward ratio not particularly attractive. We have reduced the equity quota to a slight underweight.

Bonds

• Yields rise on robust economy and steadier inflation. Yield on 10-year treasuries above 4% for a short term.
• Corporate bonds a real alternative to equities with attractive yields. Local currency bonds preferred in emerging markets.
• We are now only slightly underweight in bonds following recent purchases.

Commodities

• Gold burdened by stronger USD and higher real interest rates. Upside potential fundamentally limited in the short term.
• Oil maintains sideways movement since December. Supported in the medium term by China recovery and restrictive producers.
• Base metals suffer from slow China recovery. Stronger China data in Q2 and tight supply should support.

Currencies

• The EUR seamlessly continued its upward movement in the new year before strong US data led to a slight correction.
• The GBP cannot hold its recovery gains and falls back again against the EUR.
• At times, the EUR was trading above parity again against the CHF. Most recently, it went down to around CHF0.99 per EUR.