Q3 2023 – Quarterly Investment Letter

Despite the negative turn in the economic cycle, the presence of a resilient consumer base and favourable government policies have mitigated the risk of an immediate recession and minimized the potential for a severe economic downturn.

The Federal Reserve (Fed) paused on interest rate hikes, maintaining a hawkish stance, as the US experienced encouraging growth in real GDP, persistent disinflationary pressure, and a robust residential housing market.

Despite the political turmoil surrounding the debt ceiling issue, equity markets remained resilient during the quarter, driven by the strength of growth-oriented and technology stocks.

Germany’s economy entered a technical recession in Q1 2023, with GDP contracting by 0.3% after a 0.5% decline in Q4 2022, as households tightened spending.

Conclusion: Our cautious stance with a neutral positioning has been the right action during these extremely uncertain times. Having more clarity about the inflation path and as a severe recession can be ruled out, it is an opportune time to add selectively the risk exposure. At current valuation levels and from a risk/return perspective we prefer selective credit over equities. Hence, we keep the overweight in credit investments, with a focus on non-cyclical short-term HY bonds with yields of 8-9% and started to slightly upgrade equities from its minimal underweight position. In this environment we prefer an absolute return approach compared to a classic relative value mandate.

Full Quarterly Investment Letter Q3-2023

Investment Outlook - Quarterly Investment Letter
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