Questions on securities

Monday - Friday 09:00-17:00

Quick guide

Choose your country

Research Detail

2022/04/19 / Erste Group Research

Global Strategy 2Q22


The uncertainty caused by the war in Ukraine, the sharp increase in commodity prices, and the deterioration of supply chain issues are dampening the economic outlook. At the same time, the inflation risks have increased drastically. The Fed has promised a faster monetary tightening, while the ECB will be normalising the monetary policy gradually. We continue to prefer equities and corporate bonds across all rating segments from defensive sectors, especially from issuers with strong clout when it comes to setting prices.

Economy: Economic growth in the Eurozone should have picked up speed again in 1Q due to the sustainable re-opening steps that we have seen. However, the war in Ukraine is now causing economic downside risks. Commodity prices have increased worldwide as Russia and Ukraine are globally important exporters of fossil energy carriers, metals, and food. The higher prices could dampen private consumption, and any new deterioration of supply chain problems affects the manufacturing sector. At the same time, the upside risks for this year’s inflation have increased. The development of the economy and inflation from here on out will depend on the course of the war and the tensions between Russia and the West. In the USA, the economic recovery has already made more progress, and the labour market has recorded strong employment growth. Here, too, we expect to see the economy affected by the high inflation and rising interest rates. The real estate market is likely to cool down as well.

Bonds: The commodity costs and the deterioration of supply chain problems have caused the upward revision of the inflation forecast for 2022. The ECB envisages inflation rates for 2023 and 2024 close to its target. If the medium-term inflation outlook does not deteriorate until the meeting in June, the ECB intends to end the bond purchase programme (APP) in 3Q. For the time afterwards, we expect the deposit rate to be raised in December. Given the strong inflation momentum, the yields of German government bonds have increased across all maturities. As soon as a gradual upward path emerges, the yield curve should flatten from the short end. The US Fed promised a faster monetary tightening with several rate hikes until the end of the year. However, it bases its model on the assumption of a continued strong economy and high inflation. The bond market, on the other hand, is already pricing in a weaker economy, the yield curve has flattened, and an inverted curve is only a matter of time.

Currencies: The war led to safe-haven flows and an appreciating US dollar and Swiss franc relative to the euro. Fundamentals suggest a weaker USD and CHF for the coming quarters. The gold price is up, benefiting from sustainably negative real yields.

Equities: Positive sales and earnings growth should support the global equity market. We expect a performance within a bandwidth of 0 to +5% amid heightened volatility. European companies are more badly affected by rising energy prices and deteriorating supply chain issues than their US peers. Therefore, European indices should suffer more from the uncertainty and the decrease in growth momentum.

PDF Download Download PDF (1.0MB)

General information

AuthorErste Group Research
Date2022/04/19
Languageen
Product nameGlobal Strategy
Topic in focusCredits/ Corporate bonds, FX, Macro/ Fixed income
Economy in focusAustria, Croatia, Czech Republic, Eurozone, Germany, Hungary, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Switzerland, Turkey, United States
Currency in focusCroatian Kuna, Czech Koruna, Euro, Hungarian Forint, Polish Zloty, Romanian Leu, Serbian dinar, Swiss Franc, Turkish Lira, US Dollar
Sector in focus-
Download





Decline
Accept

We use cookies and web analysis software to give you the best possible experience on our website. If you consent, these tools will be used. For more details please read our Data protection policy.

INFORMATION FOR PRIVATE CLIENTS / CONSUMERS

Any information, material and services regarding financial instruments and securities provided by Erste Group Bank AG or any of its affiliates (collectively “Erste Group“) on this and any linked website hereafter (jointly the “Websites”) shall be exclusively to investors who are not subject to any legal sale or purchase restrictions (the “Interested Party“).

The publication and distribution of information as well as offering and selling of products and services described on the Websites is prohibited by law in some jurisdictions. For this reason, persons in countries in which the publication as well as the offering and selling of products and services described on the Websites are not permitted by law, must not enter the Websites and/or acquire the products displayed on the Websites.

Neither Erste Group nor any third party shall offer access to the Websites or offer the products to especially, but not limited to citizen/residents of the United States and “U.S. person” (as defined in Regulation S under the US Securities Act 1933 as amended). For this reason, the distribution or redistribution of the information, materials and products into United States or into any other jurisdiction where it is not permitted under the applicable law, as well as to the citizens/residents of these countries shall be prohibited. The securities displayed on the Websites have not been and will not be registered under the US Securities Act of 1933 and trading in the securities has not been approved for purposes of the US Commodities Exchange Act of 1936. For this reason the securities may, inter alia, not be offered, sold or delivered within the United States or, for the account and benefit of U.S. persons.

The Interested Party is solely responsible to examine, whether he may enter the Websites under the law applicable to it. Erste Group shall not be responsible for the distribution of content of any of the Websites to individuals or entities which provide false information about their right to enter the Websites. For this reason Erste Group shall not be liable for any legal claims or damages which may result from the unauthorized entering or reading of the Websites.

By agreeing to this hereto, the Interested Party confirms that
(i) It has read, understood and accepted this Information and the Disclaimer;
(ii) It informed itself about any possible legal restriction and warrants that it is not restricted or prohibited to enter the Websites according to any law applicable; and
(iii) It does not make available the contents of the Websites to any person who is not qualified by law to enter the Websites.