Horizon Handout January 2023

Economics

• Inflationary pressures remain high and Europe is mired in the energy crisis. Europe ends up in recession.
• The European Central Bank and the US Fed continue to tighten monetary policy, but with somewhat smaller steps.
• Corporate sentiment seems to have bottomed out. Meanwhile, the focus is increasingly on the brighter spring.

Equities

• Earnings expectations are likely to be further reduced in line with worsening economic data.
• There should be no significant valuation expansion in 2023. Europe and Asia are relatively more attractive.
• Drawdowns are also likely in 2023. However, the outlook towards 2024 holds limited upside potential.

Bonds

• Yield jumps on safe government bonds. US government bonds at higher current yields with a clear advantage.
• Corporate bonds again with attractive yields. Local currency bonds preferred in the emerging market segment.
• We are underweight bonds due to government bonds but are increasingly overweight in credit risk.

Alternative investments / commodities

• China's move away from 0-covid policy stabilises oil. US reserves turn from supply support to demand driver.
• Gold benefits from weak dollar. Diversification effect limited. Relative attractiveness vis-à-vis bonds reduced.
• Industrial metals robust despite recession worries. Inventories low, liquidity thin. Supercycle remains intact.

Currencies

• The euro is benefiting from improved market sentiment and a somewhat friendlier economic outlook.
• The higher risk appetite has weakened the US dollar, allowing the euro to move up from parity.
• The upward trend for the euro should continue if the winter is weathered without major setbacks.