Russia has begun its invasion of Ukraine. Explosions are reported from various cities. Stock markets are correcting worldwide and safe havens are being sought by investors.

ECB President, Christine Lagarde has changed the tone of her commentary and now holds out the prospect of a reduction in monetary stimulus, albeit on a far more timid scale than that being planned by the Fed. Only after the US mid-term elections is a Fed policy shift, back in the direction of easing, likely.

Fed commentary on plans for a possibly rapid tightening of monetary policy is likely to be followed by some rather half-hearted action. Indeed, we see the markets forcing the Fed to back off from any aggressive tightening of policy. Financial markets are likely to remain volatile until the US midterm elections in November.

Independent asset managers in Switzerland had a good run last year. They must now be all the more vigilant in order not to squander the progress made in 2021 in the coming months. There are certainly enough risks.

El Salvador has adopted Bitcoin as its official national currency. Other small countries with traditionally weak currencies might also replace their national currencies, or the US dollar, with a privately-created cryptocurrency. Large countries with geopolitical ambitions will adopt their own state-controlled cryptocurrencies so as not to give up seigniorage gains and to continue pursuing an independent monetary policy.

Cryptocurrencies are on the rise worldwide. Central banks themselves, with their policies of negative real interest rates and exploding money supply, are to blame for this. Indeed, they are probably the main culprits. Almost all countries are considering the introduction of their own cryptocurrencies and would want to ban private cryptocurrencies should these become too successful.

The Bundestag election result is likely to be neutral for the markets. The Fed’s move to policy normal-ization indicates higher interest rates are coming. This will hit Tech stocks. A bigger spread between short and long rates means the maturity transform-ation business of banks will become more profitable.

We are sticking to our forecast for global economic growth of around 5.0% for this year. However, the growth rate has already passed its peak. For 2022, we expect growth of 4.0%.
China is also facing weakening economic growth. Moreover, there are problems in the real estate sector.
The Biden Administration is having difficulty finding Congressional majorities for its ambitious $3,500 billion spending package.
The Fed wants to start reducing (“tapering”) its bond-buying programs in November.
Federal Open Market Committee (FOMC) member interest rate forecasts (the “dot plots“) are consistent with one rate hike next year followed by three rate hikes in each of the following two years.
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.
The quiet sideways trend in the US dollar continues.

The independent asset managers in Switzerland are facing reality, both with a political turnaround in Germany and with a stock market that, in the face of expected interest rate hikes, will no longer be so exhilarating, as the latest AVI index shows.

Peking’s policies of debt containment have left skid marks on Chinese economy, and they are hurting China’s property market.

The Senate’s passing of a $1 trillion infrastructure package with the support of 19 Republican senators, including Senate Minority Leader Mitch McConnell, shows the Biden Administration still has momentum behind its government spending objectives.

Not only in China, but also in the US and even the EU, governments are concerned about the ubiquitous power of Big Tech. The influence of their platforms on elections, the security of vast amounts of consumer data and the exploitation of workers are increasingly putting these companies under the spotlight of authorities. In the US, congressional hearings have been held and antitrust lawsuits filed, so far without far-reaching consequences. In China, on the other hand, the government is tightening the reins and the political system allows for quicker action.