Disquiet in the bond market
Yields on government bonds have risen worldwide since the beginning of the year. Those of the 10-year US treasuries climbed towards 1.80 %, after 1.51 % on the last day of December. The yield on Swiss government bonds managed to return to positive territory, showing the flip side of the price movement. Thanks to our strong underweight in government bonds, we were able to limit the negative impact of this movement on the portfolio.
Investments with a high duration, i.e. with a high interest rate sensitivity, are under pressure due to this rise in interest rates. In equities, this affected growth stocks in general and technology stocks in particular. Value stocks and minimum variance strategies, on the other hand, did well in the first few days of trading.
The rise in interest rates shows that the issue of inflation is far from off the table. Inflation rose again in many European countries in December and, according to the latest labour market data in the US, wages are now also climbing. This raises concerns that, at least in the US, the wage-price spiral has been set in motion.
This concern also resonates in the latest statements by representatives of the US Federal Reserve. That is why bond purchases have been cut back even faster since January and the first interest rate hike is expected as early as March. The Fed is therefore sending an unmistakable signal: they are ready.
With the Fed's clear message, the chances are good that inflation expectations will not get out of hand and that the situation on the stock markets will calm down. Against this background, we confirm our tactical positioning.
