Review & Outlook
April 2021
Stock markets have performed particularly well since the start of the year in anticipation of a continuing rapid economic recovery. During his first months of office, the newly elected US President has dealt with many issues very effectively. The federal government has ramped up its vaccination programme and the desperately needed economic stimulus package worth $1.9 trillion has passed smoothly through both chambers of Congress. US households will now receive further hand-outs from the government and are likely to fuel the economic recovery with increased consumer spending. Another massive infrastructure package is already in preparation and should be presented to Congress for approval over the course of this year.
The massive spike in coronavirus infection rates, especially in Europe, is now forcing governments to tighten restrictions, however, and is souring the public mood. The opening-up of the tourist and hospitality industry in particular has had to be pushed back even further. This news seems to have barely affected financial markets so far, as central banks continue to pump massive amounts of liquidity into the economy in an attempt to keep short-term interest rates artificially low.
The rapid increase in public borrowing is now creating a situation where the cost of debt servicing accounts for an even higher proportion of government spending. You do not need to be a qualified accountant to see that highly indebted countries will barely be able to afford higher interest rates without eventually going bankrupt. Long-term yields on US Treasuries have risen sharply in recent weeks. The financial press and central banks blame rising inflation expectations as the main cause. But could it not also be the case that investors are demanding significantly higher yields on government bonds to compensate for the steady worsening of credit ratings?
Low interest rates – and assurances by central banks of their intention to keep them low over the next few years – continue to drive equity markets higher, mainly due to the lack of investment alternatives. However, cheap money also encourages excesses, as highlighted by the case of Archegos Capital in the US a few weeks ago. This hedge fund placed a massive bet on the Chinese stock market through the use of leveraged credit limits and derivatives. A sudden short-term market correction totally eroded the fund’s own capital within the space of a few days and led to massive losses for the financing banks. As a result, Credit Suisse had to report a write-down of CHF 4.4 billion overnight. Realistically, it is unlikely that a disaster such as Archegos Capital is an isolated case, and such speculative ventures could blow up at anytime in the face of unforeseen market volatility.
It is difficult to predict how markets will perform over the coming months. We are therefore gearing our investment strategy towards our longer-term expectations. Our portfolios are broadly diversified, with an increasing focus on forward-looking sectors such as climate change and green technologies. In addition, our investments in precious metals and options strategies mitigate the risk any event of unexpected market gyrations.
All Reviews & Outlooks
Review & Outlook 25-Q3
Review & OutlookOctober 25Dear SirsAs already noted in our previous quarterly reports, we regret to observe that theglobal geopolitical situation continues to deteriorate. In particular, Europe andNATO are not yet prepared to sit down at the negotiating table with...
Review & outlook 25-Q2
Review & outlookJuly 25Ladies and gentlemenWith global stock markets at record highs, it is easy to get the impression that the global economy is well on its way to paradise.But this impression is deceptive. For over two years, we have been reporting in this...
Review and Outlook 25-Q1
Review & OutlookApril 2025Ladies and gentlemenUnfortunately, the geopolitical chaos in the world has not changed for the better since the beginning of the year. Although a number of attempts have been made to negotiate peace, particularly between the USA and...
Review & Outlook 24-Q4
Review & outlookJanuary 25Dear Sir or Madam Forward or down? That is the key question regarding the possible path of the global economy in the year that has just begun. Geopolitically, global conditions are still continuously deteriorating. Many European countries...
Review & outlook 24-Q3
Review & outlookOctober 24Dear Investor The current outlook for the global economy is not too rosy, so it comes as a surprise everywhere that equity markets are still able to maintain an historic high. The simplest explanation lies with small investors, who are...
Review & outlook 24-Q2
Review & outlookJuly 24Ladies and Gentlemen We are increasingly concerned about the geopolitical situation in the world, which has continued to deteriorate over the last quarter. There are no signs of any real willingness to settle these wars with constructive...
Review & outlook 24-Q1
Review & outlookApril 24Dear Investor Geopolitical conditions around the globe have continued to deteriorate since our report in January. The situation in the Gaza conflict seems more hopeless than ever, as the US has not yet been prepared to make further military...
Review & outlook 23-Q4
Review & outlookJanuary 24Dear Investor The geopolitical situation around the globe has continued to deteriorate dramatically in recent weeks. Europe is showing ever stronger signs of fatigue when it comes to supporting Ukraine. On the other hand, Russia appears...
Review & outlook 23-Q3
Review & outlookOctober 2023Central banks around the globe continued to raise interest rates in the third quarter of this year. Especially in the US, news from the economic front still indicates an astonishingly subdued response to record-high interest rate...
Review & outlook 23-Q2
Review & outlookJuly 2023The US Federal Reserve has raised benchmark interest rates by 5% since spring 2022 and the market is now expecting US interest rates to rise by a further half a percent over the course of the year. Although inflation rates have been on a...