We expect the global economy to grow around 5.0% in 2021.
Ultra-expansionary monetary policy had little or no inflationary effect during the periods of lockdown because of the collapse in the velocity of money circulation that was induced by those lockdowns.
Now, with the reopening of the economy, consumers can again spend on services like travel and hotels. This will tend to increase the velocity of money circulation, increasing the risks of inflation.
The Fed has adjusted its expectations for inflation and started to discuss “tapering”. The Federal Open Market Committee now projects the first rate hike in the next interest rate cycle as early as 2023 (instead of 2024 previously).
Stock markets are experiencing abrupt shifts in sentiment but remain resilient.
The September FOMC monetary policy meeting and the indication that the Fed will begin tapering bond purchases later this year had only a marginal impact on the US dollar yield curve.
Precious metals prices have corrected sharply as real yields have picked up. More details on our assessments in the new Aquila Viewpoint.

The FED revises its inflation forecast.
The first interest rate hikes could now take place as early as 2023.
Learn more about the expected economic outlook and our current investment policy in the latest edition of our Aquila Focus with Nicolas Peter, Head of Investments Aquila.

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Focus Points:
0:00 Intro
0:18 The latest Federal Reserve decisions
1:04 The latest decisions of the Aquila Strategic Investment Committee.

1TP5Inflation 1TP5Increase in interest rates #eam 1TP5Economic growth

New virus variants will continue to prevent a complete opening of the global economy. Europe’s vaccination gap to the US has narrowed considerably. Inflation risks are high. A scaling back of highly stimulative monetary policies is not yet in sight. The recovery of the US labor market is slower than “the consensus” expected. Although more than 7 million jobs have been lost since the start of the pandemic, US wage inflation looks set to rise. The coming rise in consumer price inflation will be less transitory than central banks would have us believe.

Vaccination campaigns are being implemented at speed in most Western nations and lockdown measures are being scaled back. There is a risk that the jump in US inflation will not be just temporary. But the US labor market is still too weak for an inflation explosion. The latest US economic figures were disappointing. Central banks, like most other investors, are investing pro-cyclically and have increased their quotas for “investments” in risky instruments. Many central banks intend to hold less US dollars and more “other currencies” in their reserves.

Thanks to the continued positive macro environment and the recovery of corporate earnings, some stock indices reached new highs. Cryptocurrencies were significantly more volatile - after the Bitcoin price reached a new all-time high, it corrected by over 25%.

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Focus Points:
0:00 Intro
0:18 Is "sell in May and go away" the right investment strategy?
1:32 Bitcoin price shows its volatile side

1TP5Financial Markets #SellInMayAndGoAway #cryptocurrencies #bitcoin #aquilaFocus

Two-thirds of independent asset managers in Switzerland believe that cryptocurrencies do not belong in a client portfolio. Instead, they focus on equities and were able to significantly increase their assets under management in the first three months of the current year.

The rise in interest rates at the long end of the yield curve has come to a halt for the time being. This probably reflects the view that the Biden Administration’s infrastructure package will be financed primarily through tax increases. If implemented, the Administration’s plans would significantly worsen the international position of the US from a tax competition perspective. The good sentiment indicators in the US are due to booming stock markets. Never before have the real economy and stock markets been as linked as they are today.

Many Swiss investors had reason to be satisfied with the portfolio performance in the first quarter of 2021. In the first three months, "the higher the equity allocation, the better the performance" applied.
Two factors will influence equity markets in the short term and provide deeper insights into our tactical investment policy.

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Focus Points:
0:00 Intro
0:18 Portfolio performance in the 1st quarter
1:55 These two factors will influence the stock markets in the short term

1TP5Performance 1TP5Market Expectations 1TP5Stock Market #aquila #aquila Focus

Economic lockdowns are being rapidly reduced in the USA due to a significant drop in the number of cases. Europe, with the exception of the UK, has a clear backlog with regard to vaccinations and is again recording rising case numbers, which is why lockdowns tend to be extended or even reintroduced. The fiscal stimulus in the US is much higher than in Europe. More details on our assessments in the new Aquila Viewpoint.

Infection figures continue to delay recovery. Long-term government bond yields have risen significantly in recent weeks. Why you shouldn't say goodbye to all technology stocks.

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Focus Points:
0:00 Intro
0:18 COVID update
1:40 Yield increase at the long end of the yield curve
2:33 Why we are holding on to technology stocks

1TP5interest rate rise 1TP5operation twist #ech stocks #aquila #aquila focus

Long-term interest rates have risen sharply in recent weeks. There are 3 reasons for this: 1. due to the strongly rising government deficits, more and more bonds have to be placed with investors 2. the prospect of an end to the quarantine measures and a strong economic upswing reduce the demand for government bonds 3. rising inflation expectations. Due to the enormous debt and highly valued equities and real estate, the rise in interest rates must be slowed down. We expect the FED to take further measures soon.

Large government rescue packages are straining the capacity of bond markets to finance them. Central banks have delivered a gigantic increase in the money supply which has caused a rise in inflation expectations. Nominal interest rates on longer-term bonds have risen more than inflation expectations, leading to higher real interest rates. Given that equity and bond markets are highly valued, investors must monitor developments closely. We expect central banks will soon become even more active in combatting the rise in long-term interest rates.