CIC perspectives April 2022

Quarterly market outlook

Dear Clients,


In his government statement after the conflict in Ukaine broke out, German Chancellor Olaf Scholtz reminded the general public of the term watershed. But it was not his speech that cast doubt on the economic integration seen over the past 10-15 years as a result of globalisation – the pandemic had already done this. The rigorous policy pursued by business of optimising production to minimise costs has resulted in major dependencies on just a few companies, countries and regions. The supply chain disruptions now being seen are causing a host of knock-on problems, such as shortages of resources and higher prices for a whole range of goods. At the same time, countries with a history of close association, like those in the West, are drawing closer together again. Current events have taken on a truly tectonic scale. Both companies and investors should focus more closely on sustainable ways of doing business in future.

Mario Geniale
Signature Mario Geniale

Mario Geniale
Chief Investment Officer

Economic prospects

Consumers have had to pay significant premiums for goods of late, with inflation increasing in February to 6.2% in the United Kingdom, 5.9% in the eurozone and as high as 7.9% in the United States. Consumer prices went up in Switzerland, too. Although the year-on-year rise of 2.2% was the highest in years, it appears moderate compared with other countries.


Swiss consumer prices remain low

The Swiss franc is currently strong and expected to remain so for the foreseeable future. This is helping to stabilise prices. Unlike in countries such as Germany and the United Kingdom, the rise in energy prices in recent months has had much less of an effect on the price of a basket of goods in Switzerland. Whereas energy makes up around 10% in the EU, it is only around 5% in Switzerland.

The oil and gas price plays a far smaller role for private households in Switzerland than in other European countries. Furthermore, the Swiss market is more stable as a result of the higher share accounted for by district heating and the less advanced market liberalisation.

It is likely that prices in Switzerland will also go up less sharply than in surrounding countries in the future, as there is still no sign of inflationary effects such as a wage-price spiral. Although the EU is slowly gaining ground in the case of wages, Switzerland remains attractive for skilled workers owing to the lower tax burden. We expect inflation of 1.3% in the third quarter and 1.1% in the fourth. (muc)


Supply chain problems and rising commodity prices hitting profit margins

As a result of the war in Ukraine, commodity prices will remain high for an extended period. The Zero Covid strategy in China is also increasingly causing interruptions to production and supply problems. This is putting pressure on corporate margins, as the higher costs can only be passed on to customers with a lag. Great attention will therefore be paid to the Q1 results and company guidance that will start to be released in April. We expect equity markets to remain volatile.


Equities Switzerland

The Swiss stock market, which is dominated by the defensive stocks Roche, Novartis and Nestlé, is likely to do better in the current environment than the other markets. Profit margins should remain relatively stable in the healthcare and consumer staples sectors. If investor uncertainty is prolonged, the Swiss equity market will see cash inflows. When selecting stocks, we attach the utmost importance to companies’ sound fundamentals. Among the blue chips, we favour Novartis, Givaudan and Partners Group. (bae)


Chart SMI

Equities Europe

The European equity market is in the grip of the war in Ukraine. Putin is attempting to play his strategic trump card, Russian oil and gas exports; this is creating headaches for industry and monetary policy-makers do not like it. The slow pace of structural change in the European economy is laying bare its weakness and affecting companies’ profit situation. If the ECB were to be forced to suspend its supply of liquidity owing to inflation, this would be a setback for economic activity. We favour Linde, ASML and SAP. (goste)

Euro Stoxx 50

Chart Euro Stoxx 50

Equities US

The Fed’s plans to raise interest rates will deter investors, thereby putting paid to the profit expectations of financial analysts. Companies are cutting their profit forecasts for this year in their droves, which may lead to further severe valuation adjustments for tech stocks. However, where there is fear of an economic downturn, there are also plenty of opportunities. This is certainly true when it comes to equity valuations. We favour defensive stocks such as Oracle, Goldman Sachs and AT&T. (goste)

S&P 500

Chart S&P 500


Bond yields have risen significantly this year. The market has begun to price in a number of interest rate rises in both Europe and the United States. Accordingly, the yield curve has risen sharply at the short end. This is making it possible to invest in short-term securities with a positive yield and higher coupons, which may help to reduce interest rate sensitivity in the bond portfolio. We still favour corporate bonds with terms of two to five years and are continuing to underweight bonds. (muc)

10-year Swiss swap rates

10-year Swiss swap rates


Paving the way to the private equity market

We recently issued a press release to announce the extension of our partnership with the Swiss fintech company Stableton and demonstrated opportunities arising from transactions of private equity and private debt. These financial transactions will present opportunities for higher returns and a diversification to the traditional asset classes. Opportunities are now emerging that were previously available exclusively to large-scale investors.

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