Pandemic-related supply shortages and Russia’s war in Ukraine drove inflation to 40-year highs in 2022. Excepting energy and agricultural commodities, virtually all asset classes saw losses last year, resulting in one of the worst annual performances in history for mixed mandates. Equity rallies, usually justified by speculation of a shift to less aggressive tightening on the part of central banks, usually lasted only a few weeks. Looking to the year ahead, the market is likely to continue to focus on the outlook for interest rates and inflation. While it looks as though the peak in inflation has been passed, it is unlikely to return to the central banks’ target level of 2% in the foreseeable future. This will continue to keep the markets on their toes.

Independent asset managers in Switzerland are facing difficult times. Some of their portfolios are showing high losses due to market conditions. At the same time, a large number of players are assuming a further surge in inflation. What are the most recommendable asset classes now?

Central banks have been raising key interest rates to fight inflation and this will continue in the coming year. They will also reduce the size of their balance sheets.
We expect a dwindling growth momentum which will lead to recession in some countries. Ultimately, this will allow central banks to loosen monetary policy in a measured way in the second half of 2023.
Regarding the market outlook, one of the central questions is whether investor profit expectations for the coming year can be met or whether they will need to be revised downwards.
The inversion of the US yield curve points to a looming recession.
Equities have come under renewed pressure after central banks signal they have further tightening to do.
Regarding the market outlook, one of the central questions is whether investor profit expectations for the coming year can be met or whether they will need to be revised downwards.
The US dollar’s trend rise has come to a standstill and Gold has shown an impressive performance in recent weeks.

In the Christmas edition of Aquila Focus, Nicolas Peter, Head of Investments and Banking, ventures an outlook into the new year.

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Lower inflation rates are currently causing a price fireworks. In the latest Aquila Focus, Nicolas Peter, Head of Banking & Investments, interprets the current development on the financial markets.

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Independent asset managers in Switzerland are facing difficult times. Some of their portfolios are showing high losses due to market conditions. At the same time, a large number of players are assuming a further surge in inflation. What are the most recommendable asset classes now?

The environment has become more difficult for investors. For some months central banks have been tightening monetary policy. The war in Ukraine and other geopolitical tensions are compounding an already problematic situation. Not least, the war is having an inflationary impact, further boosting price levels that were already elevated due to the effect of the Corona pandemic on global supply chains. Governments are trying to stabilize economies with tax cuts, stimulus packages and support for, or outright purchases of, ailing companies.

Central bank interest rate hikes will slow economic growth significantly in coming months.
While the world economy is still in decent shape, with labor markets robust, various sentiment indicators are becoming gloomier.
Russia’s territorial losses in eastern Ukraine increase the pressure on Vladimir Putin. Russia’s recently announced partial mobilization will undermine support within Russia for its war in Ukraine.
Sharp hikes in key interest rates and the process of central bank balance sheet reduction point to an economic slowdown. Central banks aim to bring current unacceptably high rates of inflation back to target levels around 2%.
Government bond yields continue to rise, and the US yield curve has become more inverted.
Equity markets are due for another reality check. Valuations have come down significantly, but earnings estimates for coming quarters are probably still too high.
The US dollar continues to trend higher. The euro, on the other hand, is suffering from the Eurozone’s multiple problems.
Gold has come under pressure due to higher yields and the strong US dollar.

It is not only the stock markets that are showing their volatile side this year. Following the recent rise in interest rates, the bond markets are also down by double digits. So it's high time to take a closer look at this asset class in the latest Aquila Focus. Nicolas Peter, Head Investments & Banking Aquila AG, is joined by Patrik Kauffmann, Portfolio Manager at Aquila Asset Management AG.

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Jerome Powell’s speech was crystal-clear and markets are reacting.

Over the past few weeks, the stock markets have been on the rise again for the first time. Is this a good reason to rethink your equity allocation, or is it still too early? Nicolas Peter, Head Investments & Banking Aquila AG, explains the current situation on the financial markets.

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A difficult first half-year is over. Practically all asset classes show a negative performance in the sixmonths to end-June. Central banks face tough policy decisions, the effects of which could be troublesome for capital markets.