Incrementum-IASF季节性反思2024年2月（英）

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2024/01

SeasonalReflections

TailwindInvesting

Dearreader,

it'swinterinSchaan-albeitcurrentlyinitsuglyguise:single-digittemperatures,lead-greyskies,rainandfog-theperfecttimetostartwritingthewintereditionofmySeasonalReflections...

IspentthepastthreedayswithmyIncrementumfundmanagercolleaguesatthisyear's

FondsProfessionellcongress

.Atstand160onlevel1inMannheim'sRosengarten,wehadmanyinterestingandspiritedconversationswiththeprofessionalinvestorspassingby.Theoccasionaffordedmetheopportunitytomeetsomefamiliarfacesfromthepreviousyearandallowedmetogathervaluablefeedbackformywork.

RonniStöferle,MarkValek,HGS&ChristianSchärer(fromleft)

Andlikelastyear,wewerenotonlyexhibitorsatthefundcongress,butalsohadapresentationslot.MycolleagueDr.ChristianSchärerandIspokeonthesubjectof"TailwindInvesting",apresentationtopicthatattractedaconsiderablenumberofvisitorsdespiteitbeinglunchtime.

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Andasyou,dearreaders,mayalsobeinterestedinthistopic,Ihaveincludedachaptersummarisingourpresentationbelow.

Astheresponsiblemanagerofaglobalmulti-assetstrategyfund,personaldialoguewithinvestorsandthosewhomaywanttobecomeinvestorsisveryimportanttome,asitallowsmetoconstantlycheckwhetherourinvestmentapproachandourcommunicationaresufficientlytransparent.Iwasthereforepleasedthatthedialoguewiththevariousinterlocutorsdidnotrevealanysignificantdeficitsinthisrespect.

Iftherewereanycomplaintsorcriticalquestions,itwasmoreregardingperformanceinthepastyear,asIASFhasbeeninasustainedconsolidationphasesinceitsall-timehighinApril2023.However,asemphasisedtimeandtimeagaininMannheim,investingisalong-termendeavour,whichnaturallyalsosuffersfromoccasionallullsandheadwinds.

Notattemptingchart?!?-IASF-USD-I,

IFM,

24JAN2024

Tableofcontents(allunderlinedpassagesinredareactiveweblinks!):

-Areviewoftheyear2023 S.

3

-HowhasIASFfaredinthisenvironment? S.

6

-2024-QuoVadis? S.

9

-TailwindInvesting S.

19

-IASFPM-Feedback S.

30

-Concludingremarks S.

35

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AREVIEWOFTHEYEAR2023

Theviews,analysesandforecastscontainedinthisdocumentarebasedoncurrentmarketconditionsandreflecttheopinionoftheauthor.Allinformationhasbeencompiledfromsourcesbelievedtobereliable.However,norepresentationorwarrantyismadeastoitsaccuracyorcompleteness.SeasonalReflectionsareissuedtoregisteredsubscribersforinformationalandentertainmentpurposesanddonotconstitutearecommendationorsolicitationtobuyanysecurityortheIncrementumAllSeasonsFund.HistoricalperformanceisnoguaranteeoffutureresultsandthevalueoftheFundmaygodownaswellasup.Ifyouwouldlikeinvestmentadvice,pleasecontactanauthorisedinvestmentadviser.

2023heldseveralsurprisesinstoreforinvestors.Ingeopoliticalterms,theongoingtrenchwarinUkraineandtheIsrael-HamaswarthatbrokeoutinOctoberwerethedominantthemes,whilerelationsbetweentheUSAandChinaremainedonaconfrontationalcourse.AllofthisisovershadowedbytheconsequencesofthepoliticallydrivenenergytransitionintheWest,whichisnotonlyveryexpensive,butalsoraisesthequestionofsecuringsocieties'energyneedsandinternationalcompetitivenessinthelongterm.

Ineconomicterms,theconsensusexpectationsatthestartoftheyearwereforrecessionarytrendsintheG7countriesandasignificantrecoveryintheChineseeconomyfollowingtheendoftheharshCovidrestrictions.Thisledtoanegativeoutlookforthestockmarkets.Overthecourseoftheyear,however,economicdevelopmentintheG7countriesprovedtobefarmoreresilient,whileChina'seconomyhasbeenlaggingexpectations.

Asafundmanager,Iexperienced2023asaratherdifficultyear.ThiswasprimarilyattributabletomyunderestimationofG7andUSgrowthinparticular.ThisinturnwasduetothefactthatIunderestimatedthefiscalstimulusprovidedbythelevelofnetnewgovernmentdebt,whichhasnotbeenseenforalongtimeinboomtimes.Forexample,theUSgovernment'snetnewdebtin2023-atfullemployment-was6.2%ofgrossnationalproduct,whichonlyroseby2.5%inrealterms.Inotherwords,withoutthegovernment'snewborrowing,theUSeconomywouldhavebeeninrecessionlongago,asituationthatcanalsobeobservedelsewhereintheG7countries.

USnetnewdebtonanannualisedbasisin%ofGNP,source:

St.LouisFed

USGNPonanannualisedbasis,source:

TradingEconomics

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Ontheotherhand,myexpectationswithregardtotheinflationtrend("Itisindeedobviousthatwehavepassedafirstinflationpeakandthataslowingeconomy,coupledwithatightermonetarypolicyandsupportedbyagrowingbaseeffect...willfurtherdampenannualinflation.";p.4,

SR2023/01)

aswellastheinterestratetrend("Consequently,weexpectinterestratestorise,especiallyatthelongerendoftheyieldcurve.";p.5,

SR2023/01)

provedtobelargelycorrect.Intheirfightagainstrunawayinflation,thecentralbankscontinuedtoraiseshort-terminterestrates(USFed+100bpto5.5%;ECB+200bpto4%),whichinitiallyalsocausedyieldson10-yeargovernmentbondstoshootup.

However,thisprocesswasalmostcompletelyreversedintheUSAinNov/Dec2023,while10-yearGermangovernmentbondsevenclosedtheyearwithayieldof2.02%,morethan50bplowerthanatthestartoftheyear.Meanwhile,thereducedinterestratedifferentialattheshortendinfavouroftheEURcausedittostrengthenbyaround3%againsttheUSD.

Itwassurprising,however,howlittlefinancialmarketsasawholeandstockmarketsinparticularwereinfluencedbythesehighershort-terminterestrates.

Final2023AssetClassPerformanceNumbers,

BespokeInvestmentGroup,29.12.23

Astheoverviewaboveshows,significantdouble-digitgainswerethenormonequitymarkets,exceptforlossesinChinaandHongKong.AlsoremarkablewastheweakperformanceoftheDowJonesDividendasagaugeforvaluestocks,whichbarelychanged.Meanwhile,bondmarketsmorethanmadeupforthelossesaccumulatedduringthefirstthreequartersduringthefourthquarter.Thecommoditiessectoralsosufferedfrombroadweakness,apartfromgold,whileonthecurrencysidetheJPYwastrendingsignificantlyweaker.

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Overall,itissurprisinghowlittleimpacttheriseininterestrateshadonfinancialmarketvaluations.Afteryearsofmarketparticipantsjustifyingtheriseinvaluationswithfallinginterestratesandcentralbankbalancesheetexpansion(QE),neithertheriseinshort-terminterestratesnorthecentralbanks'bondsaleswerereasonenoughtocausevaluationstocontractin2023.Onthecontrary,investorsapparentlyregainedfaithintheFedputaftertheUSbankingcrisisinthespring,whichtheUSFederalReservecombatedwithextraordinarynewliquiditymeasures.

HavensteinMoment,

Substack,

22JUL23

Wewerealsosurprisedbyhowlittlethehighlyindebtedeconomyhasbeenaffectedbytheriseininterestratessofar.Andneithertherecordproportionofzombiecompaniesnortherapidlygrowingprivatemarkets(equity&debt)sectororthepropertymarketwereparticularlyimpressedbytheriseinfinancingcostsin2023.

Thisiscertainlyalsoduetothefactthatwhiletherapidriseininterestrateshadanimmediatepositiveimpactonassetsthatweremainlyheldatsightduringthelongzerointerestratephase,liabilitiesstillhavetoabsorbthefulleffectoftheriseininterestratesasmediumandlonger-termfinancingagreementsexpire.IntheUSAinparticular,renewedconcernsaboutfinancialinstitutionsthatareheavilyinvolvedinfinancingcommercialrealestate,areasignthattheriseininterestrateshasprobablynotyetbeenfullydigested.

Butallofthisfailedtoimpressthestockmarkets;onthecontrary,itseemedtogivethemarealboost.DrivenbyexuberantexpectationsregardingthepotentialofAI(artificialintelligence)andonthebackoftheso-calledMagnificent7(Magnificent7=Apple(AAPL),Alphabet(GOOGL),Microsoft(MSFT),A(AMZN),MetaPlatforms(META),Tesla(TSLA)andNvidia(NVDA)),whichrecordedanaverageincreaseof111%in2023,theS&P500climbedby24%andtheNasdaq100byasmuchas54%overthecourseoftheyear.

Theimportanceofthese7stocksisbestillustratedbythefactthattheyaccountedforalmost19%ofthe

MSCIWorldIndex

attheendoftheyear.Partlyasaresultofthis,USequitiesnowaccountforalmost70%oftheMSCIWorldIndex,followedbyJapanwith6%andtheUKwith4%.-Inourview,nothingdescribestheUSequitybubblebetter,especiallywhenyouconsiderthattheUS

grossnationalproduct(GNP)accountsforlessthan20%ofglobalGNP.

MSCIWorldIndexFactsheet,

29.12.2023

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OtherstockmarketswereunabletokeeppacewiththerapiddevelopmentofUSmarkets.TheEuroStoxx600roseby12.7%,whiletheChineseCSIlostasmuchas11.4%.OnlytheJapaneseNikkei225,drivenbytheweakJPY,atleastmanagedtooutperformtheS&P500witha2023riseof28%.

Theweaknessinthecommoditiessectorwasalsosurprising,asitonceagainshowedhowsignificanttheinfluenceoffinancialinvestorsviathefuturesmarketsis.Weareoptimisticthatsentimentherewillturnagainin2024.

HowhasIASFfaredinthisenvironment?

OurIncrementumAllSeasonsFund(IASF)deliveredabelow-averageperformancein2023.Withourglobalinvestmentstrategyandbenchmark-independentallocation,westrivetobenefitfromtailwindsonthefinancialmarkets,althoughwewereonlypartiallysuccessfulindoingsolastyear.Ontheinvestmentside,wehaveavoidedanallocationtotheMagnificent7forsometimeforvaluationreasons,whichinthecircumstancesdescribedabovealreadyrepresentedasignificanthandicapforourrelativeperformance.Accordingto

ForbesMagazine

,theS&P500wouldonlyhaverisenby8%lastyearwithouttheMagnificent7.Incomparisontothat,ourfavouredinvestmentthemesdelivereddecentresultsoverall.

Despitefallingoil(-10%)andgasprices(-44%),ourENERGYstockselectionrosebyanaverageof17%overthecourseoftheyear.Thisresultwasdrivenmainlybyaneardoublingofuraniumprices,whichwasreflectedina90%increaseforCamecoanda78%increasefortheSprottUraniumTrust.OurholdingsinSeadrill,TechnipEnergiesandTechnipFTCalsorecordedgainsofaround50%,whilethelossesinthisthemeshowedupprimarilyontheproducerside(e.g.BaytexEnergy-27%).

EquityAllocationin%(gross)

-33

.1%

Em

Equity

Mi

Gr

Infrast

ergingM

OtherPr

Goldan

IndexSh

scellaneo

owth/Te

JapanVa

ructure/

arketVal

Commododucers

dPMMini

Shippi

Ener

ort

us

ch

lue

RE

ue

ity

ng

ng

gy

0

8.4

.9%

2.7%

3.3%

5.1%

7.6%

%

12.0%

14.3%

22

.

3%

-35%-25%-15%-5%5%15%25%

IASFequitythemes,31.12.2023

InourSHIPPINGsegment,wewereagainabletorecordexceptionallygoodresultswithanaverageoveralltotalreturnforourholdingsof43%.Allindividualpositionswereintheblack,deliveringgainsrangingfrom105%(Frontline)to10%(PacificBasin).Asthesectorhasveryhealthybalancesheets,cashdistributionsdevelopedcorrespondinglyfavourably,resultinginanaveragedividendyieldofjustunder10%attheendoftheyear.

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OurGOLDANDPMMININGbasketbenefitedfromfirmergoldpricesoverall(+13%in2023)anddespiteofweaknessinsilver(-1%),postedanaverageincreaseinvalueof8%fortheyearasawhole.KinrossGold(+52%)andEquinoxGold(+45%)stoodoutparticularlypositively,whileSibanyeStillwater(-46%)wasthebiggestdetractor.OTHERCOMMODITYPRODUCERSsufferedfromthegeneralweaknessincommodityprices(-4.4%in2023),withfertiliserproducersNutrien(-20%)andMosaic(-16%)inparticularfalling.EMVALUE(-3%),ontheotherhand,wasneverabletoshakeofftheweaknessoftheHongKong/Chinesemarket.INFRASTRUCTURE/REALESTATE(+21%)andJAPANVALUE(+35%;allperformancefiguresalwaysaveragedacrosstheinvestmentthemeandinvestmentcurrency)onceagainpostedsignificantdouble-digitreturnsfortheentireyear,whileourMISCELLANEOUSbucketonlymanagedtogainjustunder1%.Thelatterwasprimarilymadeupofvaluestocks,whichdidnothaveagoodyearin2023.

Allofthiswouldhavemeantadouble-digitannualresultifourriskmanagementmeasureshadnotcostus7.6%inperformancefortheyear,ahighpricetopayforourcautiousapproach.

ncrementum

ShortOptions

0.0%

Cash

6.0%

Otherliquid

assets

13.3%

FXForward-0.6%

Equities

76.7%

.CashOtherliquidassetsFixedIncome

FixedIncome

4.4%

LongOptions0.2%

FXForwardEquitiesShortOptions

LongOptions

IASFassetallocation,31.12.2023

Theoverallallocationoftheportfolioattheendof2023isshownontheleft.Duetotheslightlylowerequityallocation(76.7%ofAuMvs.79.8%attheendof2022)andthevariousequitymarkethedges(33%ofAuM),weregardtheportfolioasmoredefensivelypositioned.

Interestanddividendincometotalled0.5%and3%ofaveragefundassetsin2023asawhole.Inaddition,wewereabletogenerateafurtheralmost2%onaverageAuMthroughthesaleofcoveredoptions.

Ourcurrencyallocationalsoprovedadragonperformance,e.g.withnegativeresultscontributionsofaround-1%eachforUSD/HKDandNOK.OurJPYallocation,whichwebuiltupoverthecourseoftheyear,alsoendedupinthereddespitetheapparentundervaluationoftheJapanesecurrency.

incrementum

XPT

2.4%

XAG

4.9%

XAU

18.1%

USD

40.5%

HKD

2.6%

JPY

12.9%

GBP

AUD0.2%

SEK1.0%

NOK4.3%

CHF-2.9%

5.2%

EURCAD

4.6%0.5%

XAU=Gold

XAG=Silver

XPT=Platinum

IASFcurrencyallocation,31.12.2023

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Allinall,thisresultedinanoverallinvestmentreturnthatwasapparentlyincreasinglycategorisedasdisappointingbyinvestorsoverthecourseoftheyear,particularlyinlightoftheexcellent2022performance.Thisalsoexplainstheslowdowninnetinflowsinthesecondhalfoftheyear,whichneverthelessstilltotalledoverEUR50millionfortheyearasawholeandhelpedtoraiseIASF'stotalAuMtooverEUR160million.Despitethisslowdowninmomentum,webelievethatthisisstillaresultwhichwecanbeveryproudof.

Clearly,wecanalsobeproudofthe

RefinitivLipperAwards2023,

inwhichIASF

wasrecognisedasthebestfundinits"Mixed

AssetEURFlex-Global"categoryinGermany,

AustriaandEuropeasawholebasedonits3-

yearperformance.

Inaddition,IASFwasonceagain

awardedthecoveted5starsbythefundrating

agency

Morningstar

lastyear.

Attheturnoftheyear2023/24,thepictureisoneofincreaseduncertaintyregardingthedevelopmentofthefinancialmarketsinthecomingyear.Inouropinion,theyear-endrallyinshareandbondpriceshasalreadyanticipatedmanypositiveexpectationsfor2024.Aslowdownineconomicmomentumduetoexpiringfiscalstimuluseffectsandhigherinterestrates,coupledwithincreasedlong-terminflationexpectationsandongoinggeopoliticaltensions,leadsustoexpectanotherchallengingyearforinvestors.

However,theseshort-termuncertaintieswillcontinuetobeovershadowedbytheendofthedecades-longdebtexpansioncycle.Incombinationwithchangingdemographicsandincreasingdeglobalisationtrends,weseeadecadeofhigherstructuralinflationthantheonewebecameaccustomedtointhe2010s.Ourinvestmentfocusthereforeremainsoninflation-sensitiveinvestmentssuchaspreciousmetals,commoditiesandvaluestocks.Wewouldalsobeverysurprisediflastyear'sfavouriteswereonceagainonthewinningsidein2024andtheUSequityoutperformedtheirinternationalsiblings.Meanwhile,weseebondsaslessattractive,butremainconstructiveforthedevelopmentoftheUSdollar,atleastforthefirsthalfoftheyear.

Finally,wewouldliketotakethisopportunitytothankourlong-terminvestorsfortheirpatienceandtrustinourwork.Allinall,2024willagainrequireagreatdealofpatiencefromallofus,butweareoptimisticthatwewillbeabletoachieveanattractiveinflation-adjustedinvestmentresultinthenewfinancialyear.

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2024-QuoVadis?

Allowmetopickuponthelastsentencesandgointoalittlemoredetailaboutthecurrentsituationandtheoutlookfortherestoftheyear.

Despiteongoingrecessionexpectations,theglobalgrowthoutlookremainssurprisinglysolid.TheIMFrecentlyraiseditsglobalgrowthforecastsfor2024from2.9%to3.1%,boostedbyhighergovernmentspendingandtheresultinggrowthexpectationsintheUSandChina.However,thiswasalsoaccompaniedbyawarningreferencetoongoinginflationandincreasinggeopoliticalrisklevels.Lookingfurtherahead,theIMFleftthegrowthoutlookfor2025atastillrespectable3.2%.

GlobalgrowthestimatesoftheIMF,

Bloomberg,30JAN2024

Togetherwiththeanticipateddeclineininflationrates,astagflationscenarioappearstohavebeenavertedforthetimebeing,whichhelpstoexplaintherecentsharpriseininvestors'riskappetite.

However,IhavemydifficultieswiththisrenewedGoldilocksassessment:thegrowthimpulseinthewesternworldhasbeenstrengthenedandprolongedbytheeffectsofthemassivefiscalstimuliduringtheCovidyearsandtheirmultipliereffects.Addedtothisarethevariousinvestmentandsubsidyprogrammes,particularlytopromotetheenergytransition,whicharealsoincreasingoveralleconomicdemand.Atthesametime,thesignificantfallincommoditypriceshashadthesameeffectasataxcutfortheprivatesector,i.e.increasedthescopefordiscretionaryspending.Meanwhile,therapidriseininterestrateshasledtoanimprovementinincomeontheassetsside,whileonlyhavingadelayedeffectontheliabilitiessideduetothehigherfixedinterestrates.However,itisclearthattheeffectofthecircumstancesdescribedisincreasinglydiminishing,whichcontinuestoargueinfavourofmedium-termgrowthstagnation.

Brentoilpriceyear-on-year,

Ontheinflationside,thesignificantfallincommoditypriceshasalsoprovidedtemporaryrelief.Oneexampleisthefallinoilprices,whicharenowhavingadiminishinginflation-dampeningbaseeffect.On9February2024,theBrentoilpricewasonly2.7%belowthelevelof9February2023,andafurtherriseinthepricecouldthereforequicklyhaveapositivebaseeffectagainoverthecourseoftheyear.

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TheincreasingdissolutionoftheinternationalsupplychainproblemsthataroseduringtheCovidyearshasalsohadadampeningeffectoninflationoverthepasttwoyears.However,newlyemerginglogisticsproblemsinconnectionwiththeeventsintheSuezCanal/RedSea,whichIwilldiscussinmoredetailbelowinthesummaryofthepresentation"Investingwithatailwind",areintheprocessofreversingtheeffect.

USwagedevelopment&plans

,StenoSignals#82,

14JAN2024

Containerfreightrates,

BloombergPointsofReturn,

13FEB2024

Anotherreasonwhytheupwardpressureonpricesisunlikelytodissipateanytimesoon,asmanymarketobserversexpect,isthefactthatwagedemandsandwageagreementsaretrackingtheinflationtrend.Afterall,theriseininflationin2021/22cameasaparticularsurprisetoalleconomicparticipants,afterdecadesinwhichonlydisinflationorevenfearofdeflationcharacterisedpublicopinion.

ConsumerpriceinflationEuroz

one,ECB,13FEB2024

WagedevelopmentEurozone,

FinancialTimes,

7FEB2024

Forexample,consumerpriceinflationintheeurozonehadalreadyreachedmorethan5%atthebeginningof2022,whilewagesettlementswerestillatjustover1%,alowformanyyears.Thisishelpedbythefactthatthelabourmarketismuchtighterpost-Covid,whichstrengthensthebargainingpositionofemployeesandisanimportantprerequisiteformakingupforthepreviouslossofpurchasingpowerinincomes.

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Thesearejustsomeoftheshort-termreasonsthatspeakinfavourofpersistentlyhigherinflationrates.Therearealsolong-termstructuraldriversofinflation,whichIhaverepeatedlymentionedinthesereports.Theyinclude:

-thetrendtowardsdeglobalisation,beitthroughtheresettlementofindustriesthathavebeenproducinginChinaandotherlow-wagecountriesinrecentdecades,orthroughtheincreaseduseoftraderestrictions(e.g.importdutiesandsanctions),

-thedemographicchangesintheindustrialisedcountries,butalsoinChina,whererapidlyageingsocietiesarenotonlyleadingtoastagnatingorevenshrinkingsupplyoflabour,buttheincreasingnumberofpensionersisalsoencouragingthetrendtowardssavingless,therebyincreasingthecostofcapital,

-structurallyrisingrawmaterialcosts,whichwillalsoprovideIASFwithatailwindforyearstocome,duetoanextendedphaseofnewcapitalinvestmentsthatdonotsufficientlyreplaceproductionvolumes.

Aboveallofthis,however,isthedebt-financedgrowthinthepublicspendingratio.SincetheCovidyearsatthelatest,allthedamshavebrokenintermsofresponsiblebudgetmanagement.NotonlyintheUSA,butalsoinEurope,governmentdebthasbecomeastructuraldriverofdemand,andtheprivatesectorhasbeenoverwhelmedwithregulationsthatinhibitproductivity.Asaresult,acultureofdependency,envyandredistributionhasincreasinglydevelopedinsteadofpromotingperformance,self-confidenceandoptimism.

TherespectivedevelopmentsintheUSAserveasanexamplehere:

USpublicdebt,

GaveKal,

JAN2024USinterestpaymentsas%ofgovernmentreceipts

,M'touristPrivateFeedRecap,

29DEC2023

Asthechartaboveleftshows,annualnewdebtintheUSAhasrisensteadilysincethebeginningofthiscentury,contributinguptodouble-digitpercentagestogrossnationalproduct.Allofthiswasassociatedwithfallingcostsduetothelongperiodoffallinginterestratesuntil2016.Sincethen,however,thetrendhasreversedsignificantlyanddebtservicingnowaccountsforaround16%ofgeneralgovernmentrevenue,upfrom7%in2016-andrising!

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Andthisiswhereadilemmahasdevelopedthatwillalsobecomeincreasinglyrelevantforinvestors.WhileUSgovernmentdebthasapproximatelydoubledsince2014,theforeignexchangereservesofinternationalcentralbanks,forwhichUSgovernmentbondsarethemostimportantassetclassduetotheUSdollar'sreservecurrencystatus,haveremainedlargelyunchanged.ThismeansthattheUSAhasrecentlybeenincreasinglyreliantondomestic"investors"(includingtheUSFederalReserve)tocoverits(re-)financingrequirements.

Thisobviouslyhasimplicationsforcentralbankpolicy,which,inadditiontotheofficialgoalsofpricestabilityandfullemployment,hasasuperordinategoal,namely,toensurethefinancingofthestate.Andinthiscontext,Ifinditdifficulttosharethehopeofmanyinvestorsforfallinginterestrates,whichiscurrentlydrivingmanymarketparticipantsbackintoriskassetsinlinewithhistoricalpatterns.Inmyopinion,theUSA(ex-FederalReserve)doesnothavethecapacitytofinancethefurtherincreaseinnewdomesticdebt.However,iftheFedstopsorevenreversestheprocessofbondsales(balancesheetcontraction),thiswillhaveanegativeimpactontheUSdollarandthusalsoonimportedinflation.Alternatively,theFedcankeepinterestrateshigherforlongerinordertomakeUSgovernmentbondsmoreattractiverelativetootherinternationalreserveassets.However,thiswouldputfurtherpressureonthehighlyindebteddomesticeconomyandprobablyalsomakeinvestorsrealisethattheFedputisslowlycomingtoanend.

Whatdoesallthismeanforfinancialmarkets?

Inmyview,bondsremainhighlyunattractivefromafundamentalperspective.10-yearGermanandUSgovernmentbondsat2.3%and4.1%respectivelyarenotinvestablewithincreasedinflationexpectationsof3-5%.Inaddition,theriskpremiumsforcorporatebondsremainatrecordlowlevelsandwillprobablyonlyofferattractiveentryopportunitiesagainintheeventofarecession.

Againstthisbackdrop,Ifoundthefollowingthreechartsinteresting,whichshowrecordinflowsintomoneymarketfundsandUSgovernmentbondsforthepastyear.Thesewereunderstandablegiventheprioryearsofinterestratedrought.

Cumulativeinflowstomoneymarketfunds(l),USgovernmentbonds(centre)andequities(r),

M'touristPrivateFeedRecap,

29DEZ2023

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Moneymarketfundshavecertainlybenefitedfromtheshiftfromsightdeposits,whichhadpreviouslybeenlargelyinterest-free