In a Nutshell

Our view on the markets

Recession? Only regionally thus far Whereas Germany was unable to escape a technical recession in the end, the R-word presumably is unlikely to become an issue in the United States before 2024. However, the restrictive monetary policy then looks set to take a toll there as well because “higher for longer” continues to be the motto that central banks are following. A soft economic landing remains the much less probable alternative scenario, which is being kept alive by the recent acceleration in disinflation.

Everything AI

Artificial intelligence is the topic of the hour on equity markets these days, so the rally on (US) stock exchanges has accordingly been one-sided and limited to just a handful of companies. From a valuation perspective, stocks are less attractive today in both absolute and relative terms than they were a half-year ago. So, taking profits and positioning oneself a bit more defensively going forward are likely to pay off in the near future. Government bonds exhibit a good risk/reward tradeoff at the moment and will likely prove to be a valuable parachute for portfolios in the event of a substantial stock-market correction.

A difficult image makeover

China these days appears to be trying hard to burnish its image in the international community, but this probably won’t be easy to accomplish. At any rate, China’s peace initiative to end the war in Ukraine has thus far been more a marketing campaign than a gamechanger.

Cashing in, bigtime? When politicians trade on the stock market

Stock-market dealings by US politicians have repeatedly made headlines in recent years. Although congressional members have been barred from trading on non-public information since 2012, securities transactions fraught with conflicts of interests are still business as usual on Capitol Hill. New ETFs now enable investors to tap into the purported knowledge advantage in the Capitol. Is that a judicious strategy?

Ask the experts

Will the wave of bank failures come to an end soon? Why is the euro so weak against the Swiss franc despite higher interest rates in the Eurozone? Is private equity an artificially overvalued asset class? And is the second crypto winter already over? You’ll find our answers to these questions in our quarterly Q&A.

The US federal debt ceiling dominated political news coverage from Washington D.C. for weeks. As so often happens, a compromise was reached at the last minute. The Fiscal Responsibility Act significantly restricts spending for the next two years and suspends the debt ceiling until January 2025 (until after the next presidential election). A major victory for Joe Biden was the fact that much of his reform agenda, such as the Inflation Reduction Act, remains practically untouched. Although debt-ceiling showdowns have become a familiar routine by now, financial markets were tense in recent weeks, as one can see in the yield trajectory of very short-term US Treasury bills, which has now started to pull back as a sign of relief. Things could remain volatile, however, because the expected issuance of a lot of new government debt securities could drain liquidity from the financial system in the near future. Moreover, postponed does not mean resolved – the next act of the debt-ceiling drama awaits us in two years.