Five questions that are on the minds of our experts.

Hard landing, soft landing, or no landing at all? Many scenarios about economic development were discussed last year. So far, the largest economies have been spared a hard landing, meaning a painful recession. Germany is in an economic stagnation, and the rest of Europe can boast weak growth, mostly due to less pronounced industrial sectors. In the United States, good growth continues, emphasized by the consistently stable job market in December. The job market is, in my opinion, the key point in determining the type of landing. If companies keep people employed (and they receive their wages or salaries), the downturn is likely to be less severe. Experiences from the pandemic and the associated difficulties in hiring or demographic developments could be reasons why this scenario occurs. However, the monetary policy remains a risk factor. Both in the Eurozone and the United States, central banks are adopting a cautious approach, and economic growth may still decline. The crucial factor will be how factors like private consumption can counteract this.

Andreas Auer, Relationship Manager Institutional Business

The question of whether the peak of bond yields in 2023 has already been reached and what comes next is of great importance to investors. With the highest yields on 10-year bonds in Germany since 2011 and in the U.S. since 2007, it seems that 2023 marks a new era after the phase of ultra-low interest rates following the financial crisis. In the Eurozone, we are witnessing the highest money market rates since 2008, and the era of negative money market interest rates seems to be behind us. After the inflation shock, markets must now reassess the level of yields. An indicator could be real interest rates, which were very low to negative during the low-interest-rate phase. Currently, markets tend to aim for these valuations again, which, in our view, is too optimistic. Considering demographic considerations and anticipating a significantly weaker long-term growth, the Japanese scenario becomes apparent. However, it is important to note that even in Japan, real yields were mostly positive. In our opinion, the market has already priced in the most optimistic scenario for 2024 in the fourth quarter. However, a significant increase cannot be ruled out from the level at the beginning of the year.

Harald Besser, Head of Portfolio Management

The fact that stock markets, at least in the last weeks of 2023, have risen strongly goes against the recession scenario. The upcoming wage negotiations for about half of all employees in the Eurozone in the first half of 2024, along with base effects that will curb inflation's decline, speak against the "everything will get better quickly" scenario, especially given the challenging geopolitics. A yield in the ten-year range around two percent with a benchmark interest rate of 4.5% speaks, in my opinion, against reason. Therefore, it will be interesting to see where the journey goes.

Thomas Odehnal, Portfolio Manager

In the era of multiple crises, the remarkable resilience of U.S. growth remains the only constant. Around this time last year, we assessed the risk of a recession as low, considering the underlying fundamental data to be underestimated compared to consensus. We are confident that this trend will continue until 2024. Our basic assumption of a soft landing for the U.S. and global economy persists. In this scenario, we expect the U.S. Federal Reserve to lower interest rates due to positive developments in inflation control, not due to a sufficiently large deterioration in economic growth that requires monetary incentives.

Michael Wilnitsky, Product Manager

A few mega-cap stocks were responsible for the majority of the performance in the MSCI World Index. Thus, a broadly diversified actively managed stock portfolio likely lagged behind the development of the "market." Towards the end of last year, there was broader participation in the year-end rally. However, at the beginning of the year, the "glorious seven" mostly underperformed and were primarily responsible for the weak start of the U.S. stock market in the new year. Josef Stadler, Portfolio Manager

Josef Stadler, Portfolio Manager

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