Dear 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 support for Israel dependent on a ceasefire and Russia continues to step up the pressure on Ukraine. In the Far East, North Korea is profiting by supplying weapons to Russia, thereby boosting its self-confidence, and the war rhetoric is ramping up again. China is battling economic problems and the US is trying to put the brakes on its attempts at technological catch-up by imposing further sanctions and import duties. This, in turn, is increasing the pressure on China in its relations with Taiwan, which produces around 80% of the world’s computer chips on its territory.

Amazingly, the US continues to enjoy mild economic growth, although a sharp slowdown will start to emerge over the coming months. In Europe, on the other hand, the data are not encouraging and in particular Germany, the EU’s former driving force, is now in recession. Surveys indicate that confidence in government stands at just 30% in the EU and has even dropped to an all-time low of 28% in the US. This does not bode well for the fresh elections upcoming around the globe or at least hold out the prospect of significant potential for change.

Worldwide, inflation rates have now fallen sharply from the all-time highs reached at the beginning of last year. The financial markets have celebrated, with prices advancing significantly over the past few months, as investors expect central banks to now cut rates sharply in order to stimulate the economy. The Swiss National Bank led the way several weeks ago, cutting its key rate by 0.25% due in particular to pressure from the export industry, which is suffering as a result of the high exchange rate of the Swiss franc. The other central banks, however, see a major risk that inflation rates will rise again and so want to maintain a wait-and-see stance before cutting rates. Unfortunately, these expectations are borne out by the sharp rise in the oil price in recent weeks.

On several occasions over the past few years, we have touched upon the fact that the growth in global debt is unsustainable and out of control. US government debt alone currently stands at USD 34 trillion and every 100 days increases by a further trillion “1’000’000’000’000”! A large proportion of this debt pile will soon fall due and will now have to be refinanced at much higher interest rates. But let’s not deceive ourselves; the situation in the rest of the world is similar. This means that even more debt must be created, further weakening the purchasing power of the currencies in question over time.