Review & outlook

December 2021

As we now put an extremely turbulent year behind us, it seems harder than ever to reliably forecast what the New Year will bring. Even two years on, we are still completely in the grip of the pandemic and there is no end in sight.

The financial markets have so far managed to ride out this crisis very well, however, and last year our assets under management remained on a positive trajectory.

One major problem for the global economy stems from last year’s sharp rise in inflation in many countries. In the USA, prices in November were 6.8% higher year on year; in Germany, they were up by 5.2%. By contrast, inflation in Switzerland remained low at 1.5%. Inflation that remains persistently high over a relatively long period reduces the purchasing power of incomes and forces central banks to fight back and hike interest rates sharply. But after decades of falling interest rates, there are major risks associated with a sudden monetary policy turnaround.

Ever lower interest rates have propped up assets such as real estate, equities and bonds and facilitated public and government debt. If interest rates do rise sharply again, these assets are likely to plummet and private- and public-sector debt will become a problem.

The crises of recent years have prompted governments to implement extensive bailout measures so as to prevent a global economic crisis like that in the 1930s. But this has led to massively higher debt piles. In light of the low level of interest rates thus far, and because they have been lower than economic growth, this debt has hardly been a problem. As interest rates rise, however, so too do debt service costs, which would have negative repercussions, especially amid low economic growth.

If the global economy continues to perform as well as it did last year and incomes rise at a faster pace than interest rates, the debt ratio will fall. If prices, especially energy prices, continue to rise sharply, the bottlenecks in global supply chains fail to diminish and geopolitical tensions continue to mount, however, this will increase the likelihood of imminent stagflation like that in the 1970s, when high inflation was accompanied by an economic slump.

The New Year is only just beginning and it is currently impossible to forecast a reliable direction for the rest of the year. We are therefore aligning our investment policy with our longer-term expectations. Our portfolios are broadly diversified, with our focus increasingly on forward-looking domains such as climate change and green technologies. Our investments in precious metals and temporary hedging strategies also mitigate the risk in the event of unexpected market fluctuations.

A lot has happened in recent years, making it difficult to remain hopeful. But without hope, it is almost impossible for new things to emerge. In that vein, we wish you and your loved-ones all the best for 2022. Stay safe and well.

All Reviews & Outlooks

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...

Review & outlook 23-Q1

 Review & outlook April 2023The financial markets have long been warning on the risks posed by the massive interest rate hikes by central banks. But for us too, last month’s collapse of Credit Suisse was a previously unimaginable scenario. The takeover by UBS that...

Review & Outlook 22-Q4

 Review & OutlookJanuary 2023An extremely eventful year is now at an end and will go down in the history books. At the beginning of the year, sentiment across the economy was still optimistic due to the waning pandemic, but the optimistic mood was then abruptly...

Review & Outlook 22-Q3

Review- & OutlookOctober 2022The problems plaguing our world are currently so manifold that it would be impossible to list them all within the confines of this letter. Although Ukraine has made some advances in recent weeks thanks to the military aid provided by...

Review & Outlook 22-Q2

Review & OutlookJune 2022The economic situation continued to deteriorate in the second quarter, most notably as the prospect of an imminent end to the war in Ukraine receded. This is impacting on the prices of many commodities such as energy and foods, pushing global...

Review & Outlook 22-Q1

Review & OutlookMarch 2022Schon während der Pandemie der letzten zwei Jahre zeichnete sich ein baldiges Ende der Globalisierung ab. Der Einmarsch Russlands ins Nachbarland hat nun aber definitiv die Weltordnung beendet, an die wir uns seit dem Ende des Kalten...

Review & Outlook 21-Q3

Review & outlookOctober 2021The global economy has performed well over recent months, although some darker clouds are already gathering on the horizon due to many different reasons.The continuing spread of the Delta variant of the coronavirus has dashed all hopes...

Review & Outlook 21-Q2

Review & outlookJuly 2021Our investments have continued to perform well in the second quarter. Global stock market indices are now between 10 % to 25 % higher than at the outbreak of the pandemic in January 2020. This might trick us into thinking the pandemic has...