Our view on the market at a glance

  • Governments and central banks remain committed to generous stimulus measures. This in combination with consumer pent-up demand and a strong wave of capital expenditures form a robust backdrop for the global economy.
  • GDP growth in the US is particularly strong and the service sector recovery is now driving the rebound and labor market recovery. The US Fed’s ultimate goal is to reach “maximum employment” before any interest rate hikes are envisaged.
  • European GDP growth is lagging the US by around six months. The overall environment is characterized by economic reopening with uncertainties to the summer holiday season in Southern Europe. The ECB continues to dictate the yield curve.
  • China’s economic data have been moderating lately and a soft outlook remains the base case, despite strong absolute growth numbers. On July 1, China’s Communist Party will celebrate its 100th anniversary under the slogan “follow the Party forever”.
  • Conclusion: We expect equities to outperform bonds over the next three to six months. That said, the equity market has likely run ahead of itself and to keep the rally alive, valuations need to be confirmed by the upcoming Q2 earnings season and/or driven by the current emerging capital expenditure cycle. The next market phase or “new normal” will be determined by slightly higher inflation, moderate rate hikes and tempered GDP growth numbers. Looking beyond 2022, the economy might enter into a stagnation or even stagflation phase. With so many inflection points, capital markets are about to enter a riskier and more volatile spot.

Please have a look into our complete quarterly investment letter here.