Horizon Handout June 2022

Economics

• Russia invasion delays recovery. Uncertainty and higher prices weigh on the economy.
• Price increases continue. Energy and food prices are drivers. Several months of stagflation loom.
• Central banks are forced to reverse course. Monetary policy is tightened, in Europe however, only moderately so far.

Equities

• Recession worries dominate stock markets, even if hard economic data is still surprisingly positive.
• Analysts have slightly reduced profit expectations. However, they still expect positive growth for 2022 and 2023.
• Investor outlook and sentiment have been clouded noticeably. Positive news could provide upward pressure.

Bonds

• Safegovernment bonds with tailwinds amid rising recession fears. Flattening of the yield curve.
• Risk premiums on corporate bonds continue to rise. Emerging market bonds with widening spreads.
• We are underweight bonds and remain cautiously positioned on credit risk. Short duration.

Alternative investments / commodities

• Oil embargo is imminent. However, supply is already tight. Prices and volatility are likely to remain elevated.
• Gold benefits from all kinds of uncertainties. Rising real yields slow it down, but are less dangerous with a restrictive Fed.
• Industrial metals are temporarily weaker due to lockdowns in China. Long-term supply shortage remains unaffected.

Currencies

• The ECB remains hesitant. The euro will therefore probably remain under pressure until the ECB changes its key interest rate.
• The exchange rate had fallen to below 1.04 US dollars per euro. Last week there was now a recovery to 1.07.
• After initial gains at the beginning of the war, the yen has dropped significantly. The BoJ is stuck in a low interest rate trap.