The troubled US regional banks and the emergency takeover of Credit Suisse by UBS unsettled market participants. The write-down of AT1 securities by CS led to a sharp decline in the price of the asset class.
It was only the loss of confidence that led to the distress of companies that were fundamentally soundly financed. Governments and central banks are endeavoring to restore confidence.
Negative effects on the still robust economy cannot be ruled out. Companies and consumers are threatening to become more cautious.
The monetary policy of the central banks is coming into even sharper focus.
Due to the uncertainties related to the U.S. banking sector, investors sought safe havens. These included the government bonds of the major economies, but also gold, which at times traded at over $2,000 per ounce.
The equity markets are proving resilient, but we remain cautious in our assessment and neutral in our equity allocation.
In FX markets, movements are relatively small despite stress in the financial system.

Eventful and, from an investor's perspective, once again nerve-wracking days and weeks lie behind us. Nicolas Peter, Head of Banking & Investments, explains the events in the latest Aquila Focus.

#aquilafocus #banking sector #creditsuisse #eam #aquilaag

After Silvergate, SVB is the 16th largest bank in the U.S. and the next financial company to run into trouble last week. The Silicon Valley-domiciled bank is also primarily a link between venture capitalists and startups. The institution has grown rapidly since the liquidity glut in the wake of the pandemic. Some of its capital has been invested in default-proof long-term U.S. government bonds, which have yielded low but safe interest rates in recent years. As a result of the Fed's tighter monetary policy to combat inflation, yields on these bonds have risen and, accordingly, their value has fallen significantly. To avoid having to show this as a price loss on the balance sheet, a banking institution can carry its bonds at nominal value. As a rule, the bonds are held until maturity and repaid accordingly at 100%.

The financial markets are off to a flying start in the new year, but is this development justified? Nicolas Peter, Head of Banking & Investments, provides answers. This and more in the latest Aquila Focus.

#aquila focus #zinc curve #shares #eam #aquilaag

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.

1TP5Shares #aquilaFocus #inflation #eam #aquilaag

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.

#aquilafocus #inflation 1TP5Shares #eam #aquilaag

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.