17 JAN 2022
Powell testimony and Fed official vow to bring down inflation and leave the door open to even more aggressive tapering than the base line suggested in the dot plots; IG benchmarks & ETFs suffer from their interest rate duration
Certain govts start to attempt the ‘endemic’ discussion while the WHO warned against this narrative; certain re-open pockets remain attractive given the govt willingness to loosen up the restrictions; COVID resurgence in China posts a concern to the global supply chain and the manufacturing sector
Q4 earnings started by US banks disappointing on trading revenues and rising costs; earnings quality and visibility will be key going into a regime with rising dispersion and a tightening cycle, another reason in favour of active credit- and rates management
High beta credit spreads took cue from equity vol but at a much lower magnitude; curve steepening and quality compression remain the trend as investors prefer ‘default’ risk over duration risk
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