Horizon Handout June 2023

Economics

• The deep economic slump in winter did not materialise. Now the focus is on the recovery.
• Stubborn inflation: Even if the peak has been passed, it is still too early to sound the all-clear.
• The ECB, BoE and Fed are likely to tighten a little further. But the last interest rate hikes are not far away.

Equities

• Earnings and price development so far more robust than expected. However, the driver of the rally was a valuation expansion.
• The first cracks are appearing. Valuations still defy the rise in bond yields. Vulnerability increases.
• We have increased the equity underweight, as the risk-reward ratio appears unattractive after the rally.

Bonds

• Yields on safe government bonds again in a sideways trend without concrete signs of a settlement of the US debt dispute.
• Spreads of USD financial bonds clearly above annual lows. EM high-yield bonds with noticeable spread widening.
• We are only slightly underweighted in bonds and plan to gradually increase our positions further.

Commodities

• Oil volatile sideways despite demand recovery in China. Systematics with high short position. Upside potential in the medium term.
• Gold remains an important but "expensive" portfolio component. Sustained rally possible only with Fed turnaround.
• Gloomy economy weighs on industrial metals. Limited short-term potential, long-term demand boom with energy transition.

Currencies

• Interrupted recovery: The euro recently weakened to 1.07 US dollars. However, it should rise again later on.
• The US Fed must simultaneously ensure price and financial stability and will probably only raise interest rates once more.
• The Swiss franc remains strong - much to the liking of the Swiss National Bank.