Current Situation Assessment - 3rd quarter 2022

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

Development on the financial markets

Investors experienced the darkest moments in decades in the first half of 2022. The parallel decline in bond and equity prices is extremely rare - especially to the extent experienced. Accordingly, the much-vaunted “diversification” is not effective in such times.

The historically low interest rates due to the worldwide expansive central bank policy of the last few years were a “sweet poison” for bond and equity markets. The end of this policy, which was foreseeable, was accelerated to an unexpected degree by the soaring commodity prices due to the war and the resulting surprisingly fast and strong increase in inflation. The fact that - also due to the strict “zero-Covid” regime in China - the global supply chains got out of step, further strengthened and accelerated the negative effects. All in all, it was an uncomfortable situation with which financial market players worldwide were confronted in the first half of 2022.

The central banks reacted to the high inflation figures with historic interest rate hikes (FED, SNB). However, these measures only have a delayed effect, an easing did not occur immediately and thus bonds and equities continued to be burdened by uncertainties.

In the second quarter, concerns about the economy (keyword: recession) increasingly grew. Coupled with the partly hesitant behaviour of the central banks (ECB), stock markets remained burdened. Only commodities and precious metals were able to record a positive price development in the first half of the year despite price declines in the second quarter.

Outlook

We are not making any changes to our economic assessment and expect the next economic low to occur at the end of the first quarter of 2023. Despite the fact that inflation has peaked, the topic will remain present in the third quarter. At the end of the year, we expect the situation to ease with recovery potential in bonds. Equities anticipate the economic trough with a lead time of 3-6 months; accordingly, fluctuations will continue into the fourth quarter.

The main risks remain a slide into a global recession, an energy crisis in Europe, a massive expansion of the war in Ukraine to other Western countries or an escalation with NATO. Accordingly, we expect volatility on the financial markets to remain high in the coming quarter.

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.