Current Situation Assessment - 1st quarter 2023

Our short-term assessment of developments on the financial markets.

Development on the financial markets

After the last quartes looked similar, the bond markets stabilised and the equity markets recovered slightly in the fourth quarter. The financial markets continue to price in much negative market expectation. However, a sober look at the most important key figures allows us to look ahead with a tendency towards confidence.

The good news first - interest rates are rising again. In the short term, however, this has led to falling market prices for existing bonds. However, yields on bond investments are now back at interesting levels.

First and foremost, the US Federal Reserve has responded to the high inflation levels with decisive interest rate steps and managed to break their steep rise. A recession in the USA has been avoided so far. The European Central Bank has acted much more hesitantly, creating a high interest rate differential between the USD and the EUR. However, inflation seems to have peaked.

Movements in equities were within normal market fluctuations despite double-digit setbacks in most markets. Following the recovery in the fourth quarter, year-end equity valuations are at fair levels and within long-term trends.

Outlook

The economic downturn will continue until spring 2023. The determined interest rate steps of the central banks and declining commodity prices contribute to the fact that there will be at most a slight recession in most economies. Although the extreme values for inflation have been exceeded, it is likely to be slightly above the central banks' target level of 2-3% in the longer term. As financial markets are already largely pricing in this scenario, we expect a continued recovery in bonds and equities. Geopolitical risks remain and therefore alternative investments remain attractive to improve diversification.

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.