Chance of a limited year-end rally

Economics

• Global economy loses momentum. Supply bottlenecks and high energy prices are a burden. A touch of “stagflation”.
• Outlook for 2022 is positive as there is pent-up demand, companies want to invest and politicians provide support.
• Inflation: new push in autumn, decline in 2022; however, wage pressure increases – central banks will tighten cautiously.

Equities

• The equity markets can fall more sharply after all. A year-end rally is quite possible thanks to economic optimism for 2022.
• The comeback of value has started, while cyclical stocks are likely to gain more – the reflation trade is back.
• After the healthy setback, we are positioning ourselves with a slight overweight as our market picture remains positive.

Bonds

• Yields have risen noticeably as inflation expectations have increased and central banks have become more hawkish.
• Despite moderate spread widening, we continue to favour high-yield bonds in the current interest rate environment.
• We are underweight on bonds and focus on credit risk and off-benchmark themes, while we keep duration short.

Commodities

• The gold price can hold at USD1,750 per ounce, despite fundamental headwinds. Potential is limited for the time being.
• The supply shortage of oil continues despite the OPEC+ production expansion. Oil price should, therefore, remain elevated.
• Industrial metals remain structurally supported. The price of aluminium has continued to rise in recent weeks.

Currencies

• EUR/USD: The US dollar's "interim high" is proving stable. The Fed's policy remains in focus.
• Little news on the EUR/GBP. It goes one step forward and one step back, with no definitive new trend emerging.
• CHF is benefiting from heightened risks. The European single currency falls below CHF1.08 per euro.