Fewer equities, more gold and caution with artificial intelligence. According to independent asset managers in Switzerland, these are the most important trends for the next three months.

Most central banks are still raising interest rates while liquidity and the money supply are being cut back. At times, the stresses caused by monetary policy tightening is forcing some central banks to relax their policies temporarily. But the importance of such short-term countermeas-ures should not be overestimated.
Overall, tighter monetary policies are having an increasing impact on the consumer and the economy.
The fall in inflation rates is taking the pressure off from monetary authori-ties. The peak in the interest rate hike cycle is likely to be reached in the second half of the year.
Yields in the major government bond markets have been rather stable as of late. Volatility has fallen significantly.
Trends in stock markets are increasingly reminiscent of the Tech bubble of 1999/2000. We remain cautious in our positioning and neutrally weighted in the equity quota.
Currency markets have been broadly stable. The Swiss franc continues to be in demand.
Having risen earlier in the year, the gold price is now consolidating.

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While individual independent asset managers speak of price opportunities, the majority of those surveyed tend to be more gloomy in their forecasts. More than 50 percent of external asset managers also think that text software based on artificial intelligence is completely overrated.

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.

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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%.

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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.

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