Equities the best investment in the first half-year despite various stumbling blocks

In our biweekly publication ‘Monitor' provides you with a structured overview of current capital market developments.

Current market commentary

Over the last two weeks, equities and bonds have tended to have a volatile sideways movement. The reasons for this, apart from the rebalancing flows, were the continued hawkish central banks and the ongoing withdrawal of liquidity. US interest rates in particular rose last week thanks to robust economic data. The US yield curve inverted even more as the market priced out expected rate hikes. In the coming weeks, investors are likely to focus more on fundamentals again as the Q2 reporting season gets underway. For the S&P 500, consensus expects a year-on-year decline in earnings of around 5% - excluding the energy sector, earnings stagnation is expected. Companies should therefore benefit from expectations being already low. The outlook of the companies is likely to be more important – especially against the background that analysts expect a significant growth in corporate profits for Q3 and especially Q4. Risks lurk here.

Short-term outlook

The Fed minutes of the June meeting will be published on 5 July and the ECB minutes on 13 July. These should provide an insight into the central banks' current economic assessments. On 14 July, the US Q2 reporting season picks up pace with the figures of the major US banks. Today, the manufacturing purchasing managers' indices (June) for China, Europe and the US (incl. ISM) are due. On Tuesday, German exports (May) will be published. On Wednesday, the purchasing managers' indices of the service sector (June) for China, Europe and the USA will be published. French industrial production (May) and US new orders (June) are also due. German new orders (May), the US trade balance (May), and the ISM services PMI (June) will follow on Thursday. On Friday, US labour market data (June) and German industrial production (June) will be published.

Equities the best investment in the first half-year despite various stumbling blocks

Source: Bloomberg, Time period: 31/12/2022 – 30/06/2023
  • The first half of the year was full of stumbling blocks such as the problems at US regional banks, the US debt crisis and the looming credit crunch. Yet, developed market equities were by far the best performing assets, ahead of bonds and commodities.
  • However, the risks remain numerous. At the same time, valuations have risen harply and investors are more optimis-tic. Equity markets seem vulnerable to setbacks. Commodities, on the other hand, are likely to have already priced in economic weakness in the first half-year.