Flagship Reports

Global Strategy 3Q 2021

Central banks and economic stimulus programs are supporting the economic recovery, with the expansion exhibiting much stronger momentum in the US than in the euro zone. Higher inflation rates are considered to be transitory and the monetary policies of the ECB and the Fed remain expansionary. Investment classes with higher risk appear attractive in this environment. We continue to favor investments in equities and corporate bonds from the BB-rated segment as well as BB-rated hybrid bonds issued by IG-rated corporations.

CEE Macro Outlook: Recovery to start in 3,2,1

Given better than expected 1Q21 GDP growth data, stronger global economic outlook and the brisk reopening of CEE economies stemming from the improved epidemiological situation, we have raised our 2021 GDP growth forecast to 5.1% from 3.8% a quarter ago. So far, the recovery has been mostly driven by industrial output, exports of goods and government consumption, while household consumption was depressed by restrictive measures and uncertainty. In the coming quarters, household spending should rebound strongly. In our view, CEE economies could reach their pre-COVID GDP levels in the next few quarters, with most of them achieving that in the second half of the year.

Forex News: Ups and downs on the currency markets

After the FOMC meeting participants moved forward expectations for interest rate hikes in the US on June 16, there was increased volatility in the financial markets. The dollar strengthened and further gains are also possible in the short term. In the medium term, we consider a movement of EURUSD just below 1.2 likely. The yen also strengthened against the euro in this environment, while the franc recently benefited from the rise in inflation in the Eurozone and the US. We expect a countermovement against both currencies in the coming weeks.

Interest Rate Outlook: How Will Recovery Play Out?

Despite an economic upswing, interest rate markets are facing a difficult phase. The coming economic data will still be determined by the crisis and it will be difficult to distinguish between temporary developments and sustainable trends. This argues for unsettled markets in the Eurozone and US. Central banks will be particularly challenged to guide the markets with clear communication. For the ECB, this will probably mean continuing its securities purchases unchanged for the time being, while the US Fed may reconsider its extremely expansionary monetary policy.

Economic Outlook: Upswing continues

Thanks to the rapid progress made in industrialized countries in terms of impetus, the upswing is entering the next phase: in the US and the EU, the service sector has already been sustainably ramped up again. We therefore expect a dynamic recovery in the Eurozone economy in 2H21. We forecast GDP growth of 4.4% for 2021 and 4.1% for 2022. In the US, in addition to the steps taken to open up the economy, the second stimulus package also points to acceleration in economic activity in the second quarter and a positive outlook for the third quarter.