Kaiser Partner Privatbank AG - Monthly Market Monitor June 2022

Monthly Market Monitor

June 2022

Table of contents In a Nutshell Our view on the markets

Macro Radar Tl]vPRo}(}v}u]]˙

04 06

Satellite View

Aoo}}v

G}}o]oRu

Theme in Focus

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07

08

A look at the (yield) curve

10

Ask the experts Q}v]vP}o]v~vR .vv]oulZ

The Back Page

13

Asset classes & agenda

15 Kaiser Partner Privatbank AG | Monthly Market Monitor - June 2022

3

In a Nutshell

Our view on the markets

Time for a breather In the wake of severe share-price drawdowns year-tov R ]]vP ]v }( PR u}v˙ }o]] U o}` }v}u] P}`R v P}}o]o ]l U R ]ll` }+ (} }l R v}` ]Pv].vo˙ improved. If an earnings recession doesn’t come to U R] `}o uv R }l ˙ v}` }v u} ' o˙ o v R ] }voX H}`U R ]o ]l }( }vv]vP ] ]vG}v and central-bank surprises and of a harder economic ov]vP u]v ]v X S} RP]vP }]}v R}o accordingly be kept in place.

ECB under pressure The European Central Bank in recent weeks has in]vPo˙ }u v u } ~.voo˙Z v ] o r}uu} u}v˙ }o]˙U v ] R }]vPo˙ lv }v ]v R uvu } } }X I `]oo ]}vv ] }v R R}o˙U v ] vP ]v r P]u u˙ .v]o˙ v }}v R] uvXA(R }R}}vP }( ]vG}v }o v }u R ECB } ]uouv a big 50-basis-point interest-rate hike. The US Federal Reserve as well looks set to undertake big hikes at the v˘ `} FOMC uvP X Go}o u}v˙ }o]˙ ] ]o˙ }u]vP u} ] X

Chart of the Month Dethroned | Oil wells beat Apple Market capitalization in USD trillion 3.0

2.5

2.0

1.5

1.0

0.5 01/2020

07/2020

01/2021 Apple

07/2021 Saudi Aramco

S} PBo}}uPUK] Pv P]vl 4

Monthly Market Monitor - June 2022 | Kaiser Partner Privatbank AG

01/2022

N} ]l }o}v~ O Suo]vP R}PR_ v]} (} R }vG] ]v Ukraine has by now become a reality. The military con(}v}v }o P }v (} u}vR v o}}l v } }vv } l R]PR ]o˙ R }ooX TR war in the heart of Europe is the worst humanitarian catastrophe since the Second World War. We outline our thoughts on its longer-term consequences.

A o}}l Z ~˙]o A segment of the US yield curve inverted for a few R} ]v o˙ A ]oX W ] uR } } v}R]vPU } ` ] l˙ }v}u] v ul ]PvoM AL ooU the yield curve in the past has been a reliable har]vP }( }v}u]vP ]}v X Tl]vP R˙ }v ] ]v}] X Ru]v]vP ]Pv}vU R}`U o]l`] ] o˙ v.]o }v R .vv]o ul Ask the experts Av v u} }v P H}` } I u˙ ] o ]v R v ]v u M H }v }u ˙ P]v v}`U } }uu}] ' ˙M A digital currencies a suitable means of diversifying a }}o]}M Av `]oo ]vG}v oo l v}`M Y} [oo .v our answers to these queries in our quarterly Q&A.

Saudi Aramco recently overtook technology group Apple in the race for the crown as the world’s most valuable company. While the Californians are facing harsh R`]v Ru}uv}o˙rR]v]8o v R o}l}`v ]v CR]vU R }]o Ru}R ] l]vP ]v (}R˙ }. }v R l }( }]vP vP˙ prices. The change at the top of the leaderboard reG R Pvo v }v R ]˙ ul W R energy sector is up almost 40% year-to-date while the USA’s tech-heavy Nasdaq index has lost almost }vrR] }( ] o ]v R]«vP ] ooru R]PRX P]}o˙ Po]vP vr v }o}v ]v }R sectors have returned to normal to a certain extent in R uvuX H}`U }]o uov}vo (]vP RoovPU}}Uo}(RvP˙v]}vv investors’ increasing demands for sustainability. Only those companies that seize the moment to become u}]vo o]lo˙ } }vv }vl u}vP the winners in the long run.

Kaiser Partner Privatbank AG | Monthly Market Monitor - June 2022

5

Macro Radar

Tl]vPZo}(}v}u]]˙

The question of whether the Fed will succeed in engineering a “soft landing” is likely to remain unanswered for a while yet. This positive scenario is still possible and a recession isn’t imminent, but there is a growing risk of a harder landing. The markets will probably continue to keep a close eye on central banks in the months ahead.

W]oo]S}Lov]vP_M Despite a higher-than-expected number of new jobs ]vM˙~ıUU Z }u}]v]v]R the US employment market is cooling. The USA’s unemployment rate has remained stuck at 3.6% for three }vu}vRv}`URUvuo}˙uv }ou}vRU v R}o˙ `PvR vu}( v.ooi}(ooXM}}UR]u}vvPv}o evidence that (technology) companies plan to hire fewer v` uo}˙}v} o˙ }+}vvoX oR}PR A RvPGDP P}`R ]vR.`o]lo˙ i}vr}+URo}`}`v]vUS}v}u]]˙u} uvu ] vu]loX H}`U ]}v `]R]v Rv˘`ou}vR]ooRo}ov]} Ru}uvUvRS}Lov]vP_RRUSF oR]]u]vP(}]oo}]oXR]l}}v}u] ]˙]}u`RR]PR]vR}}v E U]voP } RP]}v[P˘}} R}vG]]v Ul]vX]v B }v}RUSAU.o}o]˙}vR] ]}(Rov A ]oo}(}P}`RR]˙X vE }vP]v]v]PZ Pl]vG}v]v}E ]]vP(R]v}R future. The data points for May delivered eye-popping surprises in both the Eurozone (8.1%) and Switzerland ~XıA9X Z TR}]vPo˙Rvu}vvP]PvR Rv}(vP]v]vXTR}v E vo C vl B il ]]vG}v (}]Jv }o]˙r«vPuvPvo}}l}]uouvuoo 25-basis-point rate hikes in July and September. This }v}vo˘]}}v]˙(}RS`]N}vo

vl B U `R} }o]˙ }( WXæA9 ]v]vPo˙v askew in today’s macro landscape. The SNB’s monetary policy assessment on June 16 could provide an indica}v}(`RvvRovovl`]oooR vP]vrP]u}X Signs of relief in China The macroeconomic data released by China in early June P](} u]o }u]uX PR]vP uvP[ ]v ]u]v'Rv˘v]v]RR dip in growth caused by the lockdowns has probably bottomed out. A V-shaped rebound like in 2020 is not to be ˘R]uXH}`U]vP}`Ru(} R]v C RvoR]vRuvuUR]v C [}v }u˙vRo}o}}v}Pv}] ]uv˙}(u}v˙v.o} uRvo˙v ]v]~v }R bound to follow). The bar for upside surprises is hanging low right now.

C}vv u 2021

2022

2023

Switzerland

3.6

2.5

1.8

Eurozone

5.3

2.6

2.2

UK

7.5

3.8

1.4

US A

5.7

2.6

2.0

China

8.1

4.7

5.2 1.0

GDPP}`R~]v9A Z

Iv(o]}v~]vA9Z Switzerland

0.6

2.1

Eurozone

2.6

6.8

2.7

UK

2.6

7.7

4.0

US A

4.7

7.1

3.0

China

0.9

2.2

2.2

Last

3M

12M

Switzerland

-0.75

AR

AR

Eurozone

-0.50

AR

AR

UK

1.00

AR

AR

US A

1.00

AR

AR

China

2.85

A\

A\

Switzerland

0.90

AP

AR

Eurozone

1.14

AP

AR

UK

2.11

AP

AR

US A

2.87

AP

AR

China

2.80

AP

AP

One problem less | Container shipping prices have retreated Global Container Freight Rate Index 12,000

aK iser Partner Privatbank interest rates view 10,000

Key interest rates (in %) 8,000

6,000

10-year yields (in %)

4,000

2,000

0 2017

2018

2019

2020

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Monthly Market Monitor - June 2022 | Kaiser Partner Privatbank AG

2021

2022

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Satellite View G}}o]oZu

Ul]v ] (v]vP Z S( `}o _ The Ukrainians’ courageous resistance and Vladimir Pv[ }]} u] oo}v ul ] vo]lo˙ R Russia will dare to embark on another military adven]v R ( XTR }P ]}v}( R }vG] v the unity of the “free world” send a warning signal } }R } P]u `oo X TR ]l }( CR]v ]v]vP T]`vU (} ]vv U R ] U least for the near to medium term.

Russia’s future A severe recession is unavoidable. Even though the ]u }( W v v}v ]vP o˙ }`v ˙ R ]v o R u}uv U R˙ }v } R o}vPr u }v v XR ] ] ]l of becoming completely isolated from the West and seeing its standard of living deteriorate to the level of v}]v˙ uP]vP }v}u˙XH}` U R o]v }o o ~]v } rPv Z o˙ R (}v }v (} a renewed opening toward the West.

M} v v o vP˙ v]}v Unity within the European Union has seldom been }vP ] ] ]PR v}` W v }( R R Ro } o }v] [ ]v]] o v}vo X TR] v]}vuv o} ul ] ] } }v v ]v vP EU ]o]˙ v o u} G˘]o˙XTR˙`]ooo]lo˙ o] u} o}}o˙]v R ( X Av R v]}v } ]vo } }( vP˙o}}l v } ] v}R RU`R]R }o l ~v.]oZ }( ]vv}}vX F}} ]] M WR]o W v }v] oPo˙ (}} o(r8 ]v v S}vo˙ _ ( v l ]v ] U }u uP ing-market countries are confronted with the threat }( R} P U ]oo˙ }( P]vX C}v] R are already struggling with high levels of poverty and uov ]}v ( R }( }o] o v v risings.

Our “muddling through” scenario for the conflict in Ukraine has by now become a reality. The military confrontation could drag on for months and looks destined to continue to take a high daily death toll. The war in the heart of Europe is the worst humanitarian catastrophe since the Second World War. What are its longer-term consequences? We briefly outline our thoughts on the matter.

NATO ]o v ]v u]o] ˙ v]vP The likely accession of Sweden and Finland and r vPPuv }v E } [ v Gvl will make NATO stronger than ever. The proverbial “peace dividend” has been exhausted. The EUR 100 billion special fund established for immediate investments in Germany’s military capacity symbolizes the ]} }Pv]}v }( R v (} E } v }v] } R o(r(v ]o] X Defense spending looks set to increase in the future } R v }vvv U v R v]}v } tainable sources of energy is also likely to get further o X B}R }( R} o}uv U v }] ]v }vU }o l }( ]vv} }vX

Kaiser Partner Privatbank AG | Monthly Market Monitor - June 2022

7

oo}}v AA

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In the wake of severe share-price drawdowns year-to-date and the pricing in of tighter monetary policies, slower economic growth and geopolitical risks, the risk/ reward tradeoff for stocks has now significantly improved. Meanwhile, bonds have begun to make (more) sense again in a mixed portfolio.

A Aoo}}v M}v]} -

+

-

Cash

Equities

Fixed Income

Global

Sovereign bonds

Switzerland

Corporate bonds

Europe

Microfinance

UK

Inflation-linked bonds

USA

High-yield bonds

Emerging markets

Emerging-market bonds

Alternative Assets

Insurance-linked bonds

Gold

Convertible bonds

Real estate

Duration

Hedge funds

Currencies

+

Structured products

US dollar

05/2022

Swiss franc

05/2022

Private equity

Euro British pound

05/2022

]P E T]u(} Z less expensive today than they were a few months ago.

• ]˙E ul}vv}P}}`vR]oo]vRRo( .

Corporate earnings are likely to be a prime determinant }(M˙Ul]vPPPP˙r}rRr] }(`RRR`]oov}Roo}+`}R declines by that point of around 20% for the companies further course of this year. If the slowdown in economic in the S&P 500 index and 30% for those in the techP}`R}~vo˙oo]u}]}v oZ R˙ N]v˘X vB R R(U R}`U ui}v]vP]}vURvo˙R}l drawdowns from peaks have been much bigger than o}v`}oSvoov}]_vv}R}`v that for many stocks. Around half of the stocks in the vP ` `}ov˙XW}vv} N]v˘Ro}u}Rvæ9A }(R]oU ]]v}}lRP]vPR]}}o]}P]v vv`}`v}(9A }ı9A (}R]}( this not inconsiderable tail risk. v}.oP}`R}lv}]˙XTRoo]vP ou]vou}vR]vvP ˙ Scorecard v}(v}v}`v`lXTR]oo + }+}o˙ GRvR~v˘r}roZ }u] Macro out of the market or at least prompted them to reduce Monetary/fiscal policy R]}]}vXv˙ A U(}uu]rM˙}vRo - Corporate earnings UR`u}vvPvuvU}]}v]vPv 05/2022 Valuation Rv]oulvR]Pvo}]vvP} 05/2022 Trend least a robust retracement rally.

Investor sentiment • Ovo˙u`]oooo](R]v]]v}v]Suo˙_ bear market rally or the start of the buildout of a sus- F]˘]v}uPSoou}o]v ] ]vo}G}}X Ivv˙URvru • TRvov]]}v .˘r]v}uulR ]l}+ l` (}}lR]u}}u closed a bit in recent weeks. While the yield on 10-year }`R]o}}lo]lR}(R]˙XPl]vG US Treasury notes oscillated in a narrow rangebound }vv}}v]vPlUSFoRR`l Rvvo}vR9A ulU˙]o}vR]}v ishness are probably priced in by now just as much as parts in Germany and Switzerland climbed by another o}`]vP `}o}v}u]]˙vRP}}o]o 20 to 30 basis points against the backdrop of renewed risks in eastern Europe are. This means that the valu] ]vG}v] ]v }E U `R]R (R }v}}v}vR]˙ulu˙oPo˙ ratcheted up pressure on European Central Bank and }v}`XUSoR]U(}˘uoU}væA9 S`] N}vo vl B }8]o } l}v }}v 8

Monthly Market Monitor - June 2022 | Kaiser Partner Privatbank AG

RRv oX }v B ]v}U o]v}E U o}}u]vP}o}'v}vP}o[]RU thus once again had to put up with price losses over R]`}ovvo [R]}(P}oo the past month. As a result of the steep price declines ]vPo˙}o}`RUSDUrr}vulXTR ]vvu}vRUR]l}+ l` (}R}o]vP v`ov] vo]l]}]v B UR E uv .˘r]v}u]R]u}}u`R]vR company have also fallen out of investors’ favor lately uvuUio]l]R(}}lXIvRUSA]v and have been trading only sideways amid unusually oURrR]l]vP˙oR]v˙RFoR o}`}oo]˙]Roo˙ }v R]˙ ulX serve to run to a level slightly above the “neutral” rate TR˙}v}(R]PP]u}(RPRv]vP of interest seems to be priced in already and appears to monetary policy environment. o]u](R]}vo(}Rr˙UST ˙˙]o}oo}(XæA9XMv`R]oU(}o]vG - v]C PPlUS}ooM }v]~]vRv}(RrRvr˘ • UR E lUSDPTRUS}oo[u}v˙}o]˙vP ool]v]vG}v}Z `l}v}u]]vR( ]uovP`˙XTRvovl}(N`ov Z v ture could even deliver short-term impetus for declinCanada have also delivered big 50-basis-point rate hikes ]vP˙]ov]P]vXF}R]}vU}vv}vo ]vRuvuUvvRRB }u CE .˘r]v}u]~]oo˙R}]v}E Z }P}v]}vP(}P}]vP]P}v]]vP]v oov}˙]o(}uv]XH}`U X]vP D RorR]l]vP . ˙oURUS}o ]vR˙u˙}}vu(}u]vPR](v}v o`}v]vo˙`lRv]˘u}vRL }( uvP}oo]˙U P}vuv}vRv}` R]v]oR]lXI}oP}Ru`˙R]u Pv}ulu}vRv(}(}u}}o]} as well. The EUR/USD exchange rate looks set to at least vR}oR(}ov]v} stabilize. reasonable degree.

• GBPlUSDPTR}vvo˙RvoPo˙v ˙Ru}]o}v]vPUKP]uM]v] oA P v oA v] vv} }] B J}Rv}vR]R B v˙U}}URv. Po]']vP~v˙u} (}uRUS}oov[ `}}vXH}`UR • The price of gold has recently lost its luster. In May P}`Rl]vG}vu]˘vRvl B }(vPov E [ the yellow metal gave back its year-to-date price gains messaging make the pound vulnerable to further coru}]o˙XTRR]vP`R]RP}o}ov. }v]vR(Uvo]vP o}}lv} (}u]]vP]vG}vvu }}XTR remain an underperformer. ]o(}]`RR]vG}v`]oo}vv} • UR E lCHFP TR ]vG}v ]v S`]ov o]u ]}vR]UvRv`}R }]]vPo˙R]PRXıA9]vM˙U`R]RuvR }v ]Sv}_˙ v}` o`]RP}RUSAX Rvovl[9A ]vG}vP]]lo˙] H}`U R ]PP(}+vP P}o ]vP(}u]`R`ooXFR]vv}v recently has been the sharp increase in real interest } `lvR(vRo˙ i.ov˙ o}vPX XTR]ulR]}uoU`R]R}v} OvR}v˙URS`]N}vovl B `]oo}o˙ ˙]]v}]v}}vUo}u ' }}v}R(v}}o}o}`]vG}v pared to other assets. Pessimists can already discern a by allowing “normal” market forces to prevail and by ouo˙o«vPR(v]X Credit spreads on peripheral Eurozone bonds have widv]Pv].vo˙P]v]vv`lXIo˙]vo is in the market’s focus. Italy is more greatly exposed to RUl]v}vG]Rv}R}v]UvIo˙[ }u]vP o}v v˘ ]vP v ] ]uu]vP } v}u] P}`R}o} .P}u]vvo˙ }v ]v }[o]}(}vvXTR]P]v]R}v}( how sustainable Italy’s mountain of public debt is. Since Io˙ }o.vv}v RR]vv ˙v the average term to maturity on its debt is around seven ˙UR]v}]l}(iu]v]v˘v ~o}vX Z NRoU ]( R u} v]}v uv]}(RUR}o B C E P}R X WR]vlU R}PRU RP(}u R markets would be necessary to spur the development of ]}}o (}]vP ~v}uvPZ ˘ sively wide credit spreads.

Chart in the Spotlight Rising temperature curves | Where is the ECB’s pain threshold?

Yield differential versus 10-year German government bonds 350

300

250

200 150

100

50

0 2017

2018

2019

2020 Italy

2021

2022

Spain

S}PBo}}uPUK]PvP]vl Kaiser Partner Privatbank AG | Monthly Market Monitor - June 2022

9

Theme in Focus Ao}}lZ~˙]o

TZ] ]u ] ](( v W } ] ] M H}` U R ]v ]}v ~`R]R R ]v ] TR] ]u ] ](( v W } ] ] M in the meantime) was microscopically small and was Hardly any other indicator has as good a track record only observable in the two- to ten-year segment of as the US yield curve. Depending on which segment the yield curve. It thus was nothing in comparison to of the curve or which yield spread is taken into con- R ]} ]v ]}v ]v A P ı U `Rv ] ]}v U ] R o˙ ] v } }( tically the entire yield curve exhibited an inverted eight or even all US recessions over the last good X I R] ]u ]uo˙ ](( v U v R}o æ ˙ X S ](] oo˙U `Rv R R} r u ˙]o the yield curve signal thus be disregarded? Caution ] } R o}vP r u u l ]v U - is called for here because the four words “this time ]vP R ˙]o } ]v U ]}v (}oo}` X TR is different” arguably constitute the costliest assertheory behind this is that the high short-term yield tion on Wall Street (because it is often fraught with indicates an existing or forthcoming restrictive envi- investment mistakes). ronment that slows economic activity while the comparatively lower long-term yield reflects the market’s The “discordance” between the curves is in fact strikexpectation of a return to falling short-term interest ]vP v U R}` X A v ] ] ˘o]v o X TR rates in the medium to long run (due to the weaker 10-year/2-year yield curve spread amounts to just economic climate and the usually inevitable reces- a few basis points while the 10-year/3-month yield sion). curve spread and an alternative measure preferred by the US Federal Reserve are both extremely steep But which yield curve spread is the relevant one? at more than 200 basis points. The difference is locatP ] o˙ R ]v o] R ˘ }( R u X B U ed in the maturity spectrum between three months ( oo U R ou} (} }v ](( v `˙ and two years. That segment of the yield curve is to combine US Treasury bonds’ various (remaining) ˙ U `R]R ]oo R u l ]] v u } u ]˙ W vP]vP ` v }v u}vR expect the Fed to raise its policy interest rate forcev ˙ W `]R R }RX TR ]}v } (oo˙ ]v R R X Iv }R `} U R u}v }ov [ u} }] o ]v o˙ A ]o U ˙ }o]˙ o]u ] v} ˙ ] ] U R Puv }( R US ˙]o ](o˙ ]v U - `]oo }}v RvP X Iv R] v U R S(} ` v]vP _ ing an uproar in the financial media. signaled by the 10-year/2-year yield curve spread R ] v} v ]o˙ (o U ]uo˙ }} o˙X A brief inversion | Detectable only with a magnifying glass TR] `}o o} i] `]R R]}˙ ]v R U US yields curves this specific yield curve spread has always been the first to send a signal before any of the other possible 3.5% spread combinations. Its advance warning time before a recession has historically been between nine 3.0% and 24 months.

A segment of the US yield curve inverted for a few hours in early April. Was it much ado about nothing, or was it a key economic and market signal? After all, the yield curve in the past has been a reliable harbinger of oncoming recessions.

Taking hasty action seems inappropriate because this time really is quite different than before. That said, though, ignorance likewise is rarely beneficial on the financial markets.

2.5% 2.0% 1.5% 1.0% 0.5% 0 1M

3M

6M

current (07/06/22)

1J Inversion April 2022

2J

3J

one year ago (07/06/21)

S}PBo}}uPUK]PvP]vl 10

5J

Monthly Market Monitor - June 2022 | Kaiser Partner Privatbank AG

7J

10J

Inversion August 2019

30J

WZ]Z]Pvou'Mn Discordance between curves US yield curve spreads and recessions

400

300

200

100

0

-100

-200

1997

2001

2005

2009

10 years- 3 months

2013

10 years- 2 years

2021

2017

«Fed slope»

Recession

S}PBo}}uPUK]PvP]vl

300

20%

200

16%

100

12%

0

8%

-100

4%

-200

1981

1985

1989

1993

1997

10 years- 2 years

2001

2005

2009

Fed Funds Rate (rhs)

2013

2017

2021

Fed Funds Rate (rhs)

TZ]uoo˙]]+vn Inversion already at the start of the rate-hiking cycle 10-year/2-year yield curve spread and Fed rate-hiking cycles

10 years - 2 years

The curve’s relevance for the markets Spotting a recession and identifying its beginning and end may seem to be a trivial exercise devoid of any practical usefulness. Celebrated mutual fund manager Peter Lynch once said that the time an investor spends on analyzing the economy is wasted time. One can definitely have a different opinion in R] ] o ]v v U R}PR U u kets reliably coincide with recessions. Since the late ı U R R }vo˙ v }v ]}v `]R} a bear market (the first part of the Volcker double] ]}v (}u Jv ˙ } Jo˙ ı Z U v ˙ R u }lv U R R }vo˙ v }v u l `]R} ]}v ~R ı }lru l R Z X Foreknowledge of an oncoming recession therefore may eminently work to an investor’s advantage ~R} ] oo˙ Z X Iv v˙ U R o ]}vR] ` v equity returns and the economic activity cycle is not entirely a random one. Share-price fluctuations correlate closely with fluctuations in corporate earn]vP U v } } v]vP P}`R ] o]u o˙ a function of the economic activity cycle. Statistics } }} R } o ]}v P ]v }v v earnings estimates for the companies in the S&P 500 ]v ˘ Pv } }u]o U vo˙ [ ]u R invariably fallen over the course of a recession (aside (}u R }v ˘ ]}v ] } Z X Iv R] v U poor performance in the form of a bear market was also explained by correspondingly weak earnings fundamentals.

0

Fed rate-hiking cycles

S}PBo}}uPUK]PvP]vl

Kaiser Partner Privatbank AG | Monthly Market Monitor - June 2022

11

I[Z}v}u˙U]n No recession without a bear market US recessions and bear markets

5’000

500

50 1965

1970

1975

1980

1985

Bear Market

1990

1995

Recession

2000

2005

2010

2015

2020

S&P 500

S}PBo}}uPUK]PvP]vl

N}`v]vP]Pv~˙n Fed recession indicator in expansion territory Federal Reserve Bank of New York Recession Indicator

100%

80%

60%

40%

20%

0

1960

1970

1980

1990

2000

Federal Reserve Bank of New York Recession Indicator

S}PBo}}uPUK]PvP]vl

12

Monthly Market Monitor - June 2022 | Kaiser Partner Privatbank AG

2010 Recession

2020

A question of timing S} (U } P}} W R o v }( R ˙]o is beyond dispute. But investors are faced with (at o Z `} ]}v X F] P WR]R }( R uv˙ ]( ferent yield curve spreads really matter? Our answer is that one should ideally analyze as many yield }u]v ]}v } ]o X Iv R U meaningful warning sign of an impending recession has consistently flashed whenever at least half of all 45 possible yield curve spreads were negative. Dur]vP R o ]v ]}v ]} ]v o˙ A ]o U ˙]o curve spreads were negative in only a good 10% of all conceivable combinations. As described at the out}( R] ]o U R ]v ]}v ` o} ](] cally at the short end of the currently still very steep overall yield curve. A simple recession model devised ˙ R F o R B vl }( N` Y}l U `R]R ] }v R r˙ l ru}vR ˙]o U therefore is not flashing a warning sign yet at the moment. A recession in the next twelve months thus seems very unlikely on the whole. The second ques]}v ] P WRv R}o v ]v } l ]}v M O answer is that even though the risk of a recession is v} ˙ U R v Su]v] r]v ]}v _ R}o v} lv o]PRo˙X Iv ( U R }v}`v } R v˘ economic downturn in the USA probably has already started. It is highly questionable whether the Fed will succeed in engineering a hoped-for soft landing in the face of an extremely overheated employment market and rampant inflation. The yield curve has already submitted its opinion on this matter and could ultimately prove once again to be the canary in the }o u]v X Iv } U R}` U R}ov [ v ]o˙ R] ]˙ }]]}v ˙ X Iv R U R US stock market has gained more than 10% on average in the months immediately following a yield-curve ]v ]}v X N Ro U ] ul v } R]vl about implementing hedging strategies (as inexpensively as possible).

Ask the experts

Q}v]vP}o]v~vZ.vv]oul

C˙}v] P Bitcoin has shed a lot of feathers lately. Are digital currencies a suitable means of diver](˙]vP }}o]}]v R ovu M

}˙ oo˙ ]v[ } ˘ vo R o]]]˙ v]}vuv ]u} ]U `R]R }v[ o}}l } Rvv˙u }}vX

K] Pv P]vlP In February we asked ourselves whether Bitcoin merits a place in our or a retail ]v} [ oo}}vX O v` R u was “no.” We came to the conclusion that Bitcoin is i (} R} ˙} ooU v v Rv }vo˙ ]v uoo } v `]R u˘]uu ]].}vX TR P }( u R ]v }v.u R }vv }( our rather restrained enthusiasm about using digital v] ]vuv ]vuvX TR }o}v between Bitcoin and the tech-heavy Nasdaq index has climbed to new highs in recent weeks. In the meanuU R u} (u} }( oo ]P]o v] R ouu ˙ u} Rv A9 (}u ] ooru R]PR hit in late 2021. Even those who were invested in cryp} ]v ]]. `˙ }}l vP }R }]v o]l R]oU S}ov v P}ol}U `R]R ˘ u}u]]vPov URo˙o}u} Rv A9 }( R] oX Wv ˙ } } uv R ]v }( }vP P]v ]vG}v } ul]vP v.]o }v]}v } ]].}vU cryptocurrencies these days are nothing more than a o˙R]vP (} ~]o v ]v}voZ o}X TR withdrawal of central-bank liquidity around the world ]R]«vP`R Po˙R]l]]vuv}v today’s capital markets with full force. A (temporary)

The following questions we answer on our Investuv B o}P P Iv uv P˙ P Stocks and bonds are losing considerable value this year simultaneously amid high volatility. How do I preserve my capital in times like these?

F]˘ ]v}u P Market interest rates have rocketed in recent months. Have bonds now become attractive again?

We are always available to answer our clients’ questions and concerns regarding their portfolios.

Once every quarter, we summarize clients’ most frequently asked questions and our experts’ answers and give you firsthand insights into our asset management and investment advisory operations.

C }uu}]] P Commodity prices have risen sharply since the start of this year. Are commodities (still) a good investment today?

Iv(o ]}v PInflation figures have consistently come in higher than expected lately. When is an end to this trend in sight? And how can I construct a robust investment strategy in this environment?

C Z]v P There is (almost) nothing but bad news coming out of China these days. Is the country’s 5.5% growth target still achievable this year?

WZ]ZoMn Bitcoin is (merely) a risk-on proxy Sixty-day moving correlation between Bitcoin and Nasdaq index

Find out more on our blog:

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2012

2014

2016

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2020

2022

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Kaiser Partner Privatbank AG | Monthly Market Monitor - June 2022

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Monthly Market Monitor - June 2022 | Kaiser Partner Privatbank AG

The Back Page Asset classes & agenda

Performance as of M˙ Asset class

YTD

Cash

1 Month

-0.3% -0.3% -0.3% -0.3%

CHF

-0.2% -0.2% -0.2% -0.2%

EUR

0.3% 0.3% 0.3% 0.3%

USD

00 0 0

Fixed Income Sovereign bonds Corporate bonds

-7.6% -7.6% -7.6% -7.6% -12.4% -12.4% -12.4% -12.4% 0.2% 0.2% 0.2% 0.2%

Microfinance -9.2% -9.2% -9.2% -9.2%

Inflation-linked bonds

-7.2% -7.2% -7.2% -7.2%

High-yield bonds Emerging-market bonds

-15.2% -15.2% -15.2% -15.2% 0.4% 0.4% 0.4% 0.4%

Insurance-linked bonds Convertible bonds Equities Global

-14.9% -14.9% -14.9% -14.9%

Switzerland

-9.4% -9.4% -9.4% -9.4%

Europa

-10.4% -10.4% -10.4% -10.4%

UK

7.2% 7.2% 7.2% 7.2%

0.0%

rX9A

-2.0%

0.0%

-0.5%

-1.4%

0.1%

0.4%

2.4%

-0.6%

rX9A

-3.8%

0.4%

-13.4%

-0.8%

0.2%

2.1%

-3.5%

-4.1%

8.0% X9A

1.0%

-4.9%

8.3%

0.3%

-15.3%

-5.6%

-0.1%

3.6%

16.9%

-2.5%

-15.8%

32.8%

-0.2%

-1.4%

44.3%

-4.5%

2.2%

0.6%

-4.1%

1.3%

15.6%

19.1%

rX9A

54.9%

-0.3%

-14.1% -14.1% -14.1% -14.1%

Emerging markets

3 Years

00 0 0 -11.4% -11.4% -11.4% -11.4%

USA

1 Year

0.1%

-12.5% -12.5% -12.5% -12.5%

Alternative assets 32.4% 32.4% 32.4% 32.4%

Gold

0.4% 0.4% 0.4% 0.4%

Hedge funds Currencies EUR/USD EUR/CHF GBP/USD

rX9A

8.0%

0 00 0

Commodities Real estate Switzerland

26.2% X9A

-9.4% -9.4% -9.4% -9.4% -3.3% -3.3% -3.3% -3.3% 00 0 0 -5.6% -5.6% -5.6% -5.6% -0.8% -0.8% -0.8% -0.8% -6.9% -6.9% -6.9% -6.9%

1.4%

41.5%

69.0%

-3.1%

-3.6%

X9A

-4.4%

rX9A

20.2%

-1.1%

-3.0%

13.4%

1.8%

-12.2%

-3.9%

0.3%

-6.3%

0.2%

-11.3%

rXıA9 -0.2%

On our Agenda JvæPGo}oW]v˙D TR`]v˙v}`o}R]}`v˙]~}(o}vX Z TRvP˙]v˙RvP]vP Go}oW]v˙D ]v}]v(}u}o}vR`}o]v]˙}(]+v`˙}R v.Uo]}vvv]˙}(`]v}`X Jv}PGuu] Guv˙RRoR]v˙}(RG]vJv˙UXSP}P(}i`}o_]RP}o RRGuvG]v˙R]o(]v]}PuXIo]u˘]Ruu]}(RGR}( vP}vuvU`R]R`]ooloSRo}ou E Uo}]vR]v B oA X Jv}Jo˙PW]uo}vZu]}vZ] C S`]U]vlv`R]}lWR]˙R`}o[}ovv]}vuv]}vP]voo }˙]vP}v˙}}}vRPvP}}(W]uo}v]vRR]PR}(R]R B u]u uXIvG}vR]R`ooPR]˙[}o]u}v˙R]v9A (}u˙P}} record GBP 39.9 million..

-

Kaiser Partner Privatbank AG | Monthly Market Monitor - June 2022

15

Notes

Your reading notes

16

Monthly Market Monitor - June 2022 | Kaiser Partner Privatbank AG

Kaiser Partner Privatbank AG | Monthly Market Monitor - June 2022

17

This document constitutes neither a financial analysis nor an advertisement. It is intended solely for informational purposes. None of the information contained R]v}v]}o]]]}v }}uuv]}v˙ K]PvP]vl AG to purchase or sell a financial instrument or to take any other actions regarding v˙(]vv]o]vuvXFRu}UR]v(}u]}v}v]vR]v}v} constitute investment advice. Any references in this document to past performance v} Pv }( }]] ((}uvX K] Pv P]vl GA u v} o]]o]˙ (} R }uovU }v } vv }( the information contained herein or for any losses or damages arising from any actions taken on the basis of the information in this document. All contents of this }uv}˙]vooo}˙o`U]oo˙˙}˙]PRo`X The reprinting or reproduction of all or any parts of this document in any way or form for public or commercial purposes is expressly prohibited unless prior written }vvRv˘o]]o˙Pv˙K]PvP]vlGA X

18

Monthly Market Monitor - June 2022 | Kaiser Partner Privatbank AG

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