Horizon Handout March 2023

Economics

• The worst-case scenarios seem to have been averted. Financial markets are already looking towards recovery.
• Inflation rates seem to have peaked. Nevertheless, inflation remains far above central bank targets.
• The European Central Bank and the US Federal Reserve are tightening monetary policy further, but with smaller steps.

Equities

• The early-year rally stalled with strong US labour market data and bond yields rising again.
• The markets are unlikely to experience much of a tailwind from the earnings side, while valuations have risen again.
• Technically and fundamentally, the air has become thinner. We have therefore reduced equities to a slight underweight.

Bonds

• Rise in yields on safe government bonds. 10-year US government bond yields now back at 3.9%.
• EUR corporate bonds remain attractive. Local currency bonds preferred in EM.
• We have recently reduced the underweight in bonds and added short-dated EUR bonds.

Alternative investments / commodities

• Oil trades volatile sideways. Demand recovery in China slower than expected. Producers remain restrictive.
• Strong US labour market ends gold rally. Fundamental potential limited. Macro risks remain numerous.
• Rising inventories of industrial metals. Supply continues to struggle with production shortfalls. Long-term trends intact.

Currencies

• The euro should benefit from improved market sentiment and economic prospects over the course of the year.
• Higher risk appetite traditionally dampens the US dollar. Nevertheless, the US currency remains highly valued.
• The euro's upside potential against the Swiss franc beyond parity is limited.