Horizon Q4│2022

Key messages of the capital market outlook:

Recessions ahead: Market expectations of a quick turnaround by central banks were premature. They continue to prioritise the fight against stubborn inflation. Recessions in the US and Europe seem inevitable.

Downside potential limited: Earnings estimates are likely to be reduced further. However, at least in Europe, valuations already take much of the downside into account. Defensive positioning of investors limits the drop in equities.

Opportunities arise: Only with a more pronounced weakening of the economy and declining inflation in Q4 2022/Q1 2023 are central banks likely to act less restrictively. Investors should then become more optimistic about an economic recovery in 2023. An equity rally into the new year seems possible.

In the Insights interview we are talking with Katharina Raatz, portfolio manager at Berenberg for Small Cap Equities.