Current Situation Assessment - 4th quarter 2022

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

Development on the financial markets

Years in which both bonds and equities suffer setbacks at the same time are extremely rare. Likewise, the extent of the negative developments in the current year is unique in a historical context.

High inflation figures forced the central banks to take decisive measures, which led to an increase in key interest rates. As a result, bond prices fell significantly.

Equities were affected by the slowdown in the economy as well as by increasing uncertainty about the development of corporate profits, increased geopolitical risks, high inflationary pressure and the aggressive policies of central banks.

Equity market corrections of more than 20% are painful and drastic. In a historical classification, however, such movements are "normal" and occur at regular intervals. Particularly in view of the last, positive equity years, this year's correction is not out of the ordinary. The long-term high returns of equities can only be achieved with the willingness to accept and endure setbacks. This is the order of the day, because better times will come again for equity investments.

Outlook

Currently, equity markets are pricing in a slide of the economy into recession and the very negative investor sentiment signals that much negative expectation is contained in current prices. The bottom of the economic cycle will be reached in spring 2023. Since the equity markets are anticipating this with a lead time of around six months, sentiment will already brighten noticeably in the course of the fourth quarter of 2022. Despite declining values, the topic of inflation will remain with us in the near term and settle above the 2% level desired by the central banks. Some interest rate pressure remains, although central bank rates are likely to rise less than feared. These are also factors that argue for a recovery on the equity markets.

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.