31. Januar 2022

The Fed has left the party

In Kürze

It is hard to keep a party going when the music is switched off abruptly. Many investors headed for the exit as the Fed signalled a much sharper pivot towards policy normalisation in January.

Highlights:

Fed tightening will start in March. They promise to be nimble, not gradual, i.e. less predictable, more data-dependant, and possibly faster.
We still expect the unfinished global recovery and decent earnings growth to lend support to risk assets. Yet two key risks are materialising: a tougher Fed and rising energy prices. We scaled back our Equity overweight (OW).
In FI we retain an OW in Credit given residual ECB support and resilient fundamentals; we stay UW long-dated Govies. Both positions are paying off.
The USD still has legs on Fed support, but we expect a reversal of fortune later this year.

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The Fed has left the party

31. Januar 2022