Current Situation Assessment - 4rd quarter 2023
Our short-term assessment of developments on the financial markets.
Review - 3rd quarter 2023
The global economy continued to recover in the third quarter of 2023. However, major regional differences remain. While the US economy is growing solidly based on a historically low unemployment rate, stable private consumption and high government spending, the economic data in Europe, especially in Germany, is rather disappointing.
Inflation figures have continued to decline over the last three months. However, they remain above the central banks' target of two per cent. In this context, there have been further interest rate hikes in the USA and the Eurozone.
With the increased interest rate level, the prices of government bonds have come under pressure. The equity markets were also impressed and had to give up some of their gains from the first half of 2023 in September.
Outlook
We expect the global economic recovery to continue in the coming months. However, due to a stagnating interest rate environment at a high level, growth should be moderate. In bonds, we see the era of low and negative interest rates as over. However, the new yield opportunities are accompanied by increased default risks due to a higher interest rate burden for sovereigns and corporates.
In the Colin&Cie mandates, we therefore rely on broad diversification in bonds within the framework of the "Exclusive Solutions Funds" and continue to expand the area with very short-term bonds (up to 2 years). After the overall positive trend in share prices in 2023, valuations have risen again to neutral to expensive levels. Since the equity markets have already anticipated and priced in the weak economic recovery, we no longer expect above-average growth in this asset class. We are therefore maintaining a neutral positioning in accordance with our long-term strategic orientation.
Commodities remain underweighted due to their lower return potential compared to other asset classes. There is also an underweight in (interest-free) gold, which has lost its attractiveness in the current interest rate environment. We continue to consider the diversification of investment risks through the consideration of alternative investments as correct and sensible. Due to the rise in interest rates, we are raising the return expectation in the private debt segment. We are countering the higher risks in private equity because of the rise in interest rates with a gradual increase in the diversification of the target investments.
Disclaimer - legal notice
This publication was produced by the Investment Office of the Colin&Cie Group. The information and opinions contained in this document are based on sources we believe to be reliable. However, we cannot guarantee the reliability, completeness or correctness of these sources. All information and quoted rates are only up-to-date at the time of this publication and are subject to change at any time without notice. The content is based on numerous assumptions made by the Colin & Cie Group. It should be noted that different assumptions can lead to materially different results. The forecasts and assessments are only current at the time this publication is prepared and can change at any time without prior notice. Past performance of an investment is not a guarantee of future results. Certain investments can experience sudden and substantial losses in value. This information and views do not constitute a solicitation, offer or recommendation to buy or sell investment instruments or to carry out any other transactions. We recommend interested investors to consult their personal advisor before making decisions on the basis of this document so that personal investment goals, financial situation, individual needs and risk profile as well as further information can be duly taken into account as part of a comprehensive consultation. The information contained in this publication is marketing material that is distributed for advertising purposes only.
