Equities have enjoyed a strong start to the year, as optimism continues to grow across investment markets. There was much talk in the last quarter of 2022 about the impending recession in the developed world, as Europe would be hit hard in 2023. We ourselves have written that it would be ‘the most forecast recession of all time’. But consensus views can be fickle. Interestingly, the idea of a recession being avoided entirely is gathering pace. A mild winter, stronger euro currency, and better than expected economic activity indicators, are all contributing to the brighter mood amongst investors.
However, things are often not as bad nor as good as they seem, and at Zurich we will continue to take a considered approach through the lens of our top-down investment process. Just as we did not believe that a recession would necessarily be bad for equities, nor is avoiding one necessarily good. However, the strong start to the year is undoubtedly positive and opportunities are now bound for good investment managers. In conjunction with the positive product developments in recent months, the time to act for those looking for long term exposure to investment markets is now .
As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.
Weekly Investment News
Last week saw somewhat of a variable week for equities as several indicators proved to shift investor sentiment. US stocks lost -0.6% last week in euro terms. The announcement of wide-ranging layoffs in large US tech companies such as Microsoft and Alphabet contributed to last week’s shifting sentiment as conflicting economic indicators suggested the US labour market is still tight. This was supported by the US weekly Jobless claims report which was released on Thursday. Initial claims for state unemployment benefits dropped to 190,000 despite expectations of 214,000 claims. This is the lowest level observed since September of last year. Earlier in the week US stocks reacted negatively as the US retail sales report for December was released and displayed a decrease of -1.1%, below expectations of -0.8%. Investors have viewed this as an indication of a slowing economy, with consumers beginning to reduce their spending in the face of tighter financial conditions.
Elsewhere Eurozone equities ended the week down -0.7% amid hawkish comments made by ECB President Christine Lagarde at the World Economic Forum which was held last week in Davos. Hopes of lower inflation have been prevalent within Europe as of late and were boosted on Wednesday as figures released by the EU statistics office Eurostat, showed a decline in consumer prices in December of -0.4% month on month. Eurozone yields decreased last week on the back of more positive sentiment in the Bloc, with the Benchmark 10 Year German Bund Yield ending the week at 2.18%, the previous week’s close had seen the yield at 2.21%.
In Asia, equities continue to post weekly gains as China rolls back its strict covid restrictions which have been in place for almost 3 years. Hong Kong equities returned 0.1% in local terms last week.
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