Horizon Handout March 2022

Economics:

• Pandemic severity is easing thanks to Omicron variant. Russia-Ukraine crisis delays recovery.
• Inflation remains at a high level. As the year progresses, inflation will fall less than hoped.
• Central banks are forced to turn around. Will the ECB follow the Fed and the BoE? First interest rate step probably in 2022.

Equities:

• First the interest rate concerns and now Russia are weighing on stock markets. EM equities are holding up comparatively well.
• Silver linings are the very pessimistic sentiment, already priced risks and the still good economic outlook.
• We remain positioned for a recovery with a slight equity overweight, even though the market is likely to remain volatile.

Bonds:

• Government bonds are in demand again as a safe haven. Increasing flattening of US yield curves.
• High-yield bonds now offer higher narrowing potential. Emerging market bonds with attractive yields.
• We are underweight bonds and remain cautiously positioned on credit risk. Duration: short.

Alternative investments / commodities:

• Russia-Ukraine escalation dominates energy markets. Brent is at over USD 100 per barrel. Gas prices spike.
• Gold is in demand and recently decoupled from real interest rates. Upside potential is limited in the medium term.
• Industrial metals markets are in the crossfire of Russia. Strong long-term increase in demand are still in sight.

Currencies:

• Safe haven currencies (US dollar, Swiss franc) in demand again due to Russia-Ukraine crisis.
• The euro gives back its gains resulting from ECB President Lagarde's press conference.
• For the euro, the way up is rocky. The ECB would have to tighten to boost the euro exchange rate.