Thrilling decisions before Christmas

Thrilling decisions before Christmas
Thrilling decisions before Christmas
(c) Jose Luis Magana / AP /
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Last week, volatility returned to the stock markets. The US leading index fell by more than 3.3 per cent. The European markets fell by 1.2 per cent (source: Refinitiv Datastream). The reason for the losses was the tension between hopes for a less restrictive US Federal Reserve and actual inflation and economic data. Producer prices in the US, released on Friday, rose 7.4 per cent year-on-year, more than analysts had expected. The previous day, signs of a slowdown in the labour market had fuelled hopes for a less restrictive monetary policy. The number of applications for unemployment benefits in the USA rose for the third time in a row by 62,000 to 1.7 million – the highest level since the beginning of February.

This week, the financial markets are once again in for an exciting ride: the US Federal Reserve will hold its last meeting of the year on Wednesday. Against the backdrop of the mixed economic data described earlier, we expect the Fed to reduce the pace of its rate hikes from the previous steps of 75 basis points (100 basis points = 1 per cent, note) to 50 basis points. We do not believe that it will be able to send a clear signal of the end of the rate hike cycle as early as December. This will be followed by the European Central Bank (ECB) meeting on Thursday: most economists expect a hike of another 50 basis points. The ECB also wants to decide on important key principles for reducing its balance sheet, which has been swollen by years of bond purchases. ECB President Christine Lagarde had held out the prospect of a measured and predictable reduction in bond holdings.

Inflation is likely to have peaked in the Eurozone and the USA. However, it remains at a high level. The announced interest rate hikes this week are likely to be more moderate than before.
Note: Past performance is not a reliable indicator for future performance.

Robust companies

In general, we will keep the risk appetite of our portfolios slightly below the strategic risk budget. The risks of recession have increased, as we have often described. In our opinion, this is already partly reflected in the market prices of some asset classes. This is especially true in the segment of corporate bonds with an investment grade credit rating where we see yield levels averaging over 5 per cent in the US (source: Bloomberg). Even in the event of a global recession next year, we expect the high-quality companies in the investment grade segment to weather it well.

Correction potential for commodities

Energy and industrial commodities are moving in an environment of physical scarcity. OPEC’s policy continues to supporte for example crude oil. Nevertheless, we see a higher correction potential in the event of a recession than for other asset classes. The situation is similar for industrial metals. The necessary and government-supported expansion of renewable energy has a positive effect on the one hand. However, market and valuation aspects also speak against this segment.

Note: Past performance is not a reliable indicator for future performance.

For a glossary of technical terms, please visit this link: Fund Glossary | Erste Asset Management

Legal note:

Prognoses are no reliable indicator for future performance.


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The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011. The fund prospectus, Information for Investors pursuant to § 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the web site within the section mandatory publications or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the web site A summary of investor rights is available in German and English on the website as well as at the domicile of the management company.

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Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to § 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

This document serves as additional information for our investors and is based on the knowledge of the staff responsible for preparing it at the time of preparation. Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.

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