Mario Becker

After last year’s historically bad development in global financial markets, 2023 has so far shown itself to be a year in which some trends of the previous year, such as the ongoing increases in central bank interest rates, will continue, but other trends are already reversing strongly: For example, technology stocks are again among the winners of the new year. The Nasdaq 100 Index, which contains many well-known technology stocks, is already up almost 20 % and can make up for a large part of the losses of 2022.

The final quarter, as well as the year, did considerable damage to our safety building blocks. Above all, the building blocks that invest in European government and corporate bonds have suffered further paper losses because the ECB has made it clear that it is not yet finished with its interest rate hiking campaign.

After a strong global equity market rally in July, an equally strong correction followed in late August and throughout September, so that at the end of the third quarter we are basically back to where we saw ourselves at the end of the second quarter. This means historic losses for global government and corporate bonds, which haven’t occurred since the 1930s and 1970s, and large losses in global equities.

Due to the very poor development of the first quarter, I assumed that we should see a reprieve in the second quarter. Unfortunately, that did not happen. Instead, we had to experience another round of price drawdowns in all relevant asset classes. Interestingly, losses in the global government bond markets were also more pronounced in the second quarter than in the broadly diversified global equity markets. This is a very rare occurrence, as government bonds are primarily a portfolio stabiliser. Government bonds only move very strongly when there are unexpected changes in price levels. This is currently the case and hasn’t been seen since the 1970s.

2021 was the year for which we expected victory over Covid, as it seemed that successful vaccination programs could defeat the pandemic. However, as the year progressed, it became clear that new virus variants and sluggish vaccination campaigns would prolong the crisis. This led to a 'stop and go' economy in most countries in the second half of the year, after the 'logjam' of 2020 and the most pressing supply issues seemed to have dissipated in Spring.