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<\/figure>\n\nEvaluating the current context, even if only on the basis of the above restricted representation, is really complex, as there are differences between the determining factors of the respective time series, such as:<\/p>\n\n
- \n
- Will Russia`s war against Ukraine and the Persian Gulf war soon be over?<\/li>\n\n\n\n
- Will the outlook act as a driver of economic growth, or will politics continue to play the main role?<\/li>\n\n\n\n
- Will the focus be mainly on monetary policy measures and the corresponding responses of central banks?<\/li>\n\n\n\n
- Or will traditional economic thinking be the “new leader”?<\/li>\n<\/ol>\n\n
Fact is that we are constantly told that the evolution of interest rates is fundamental to curbing the feared rise in inflation. Based on the available data, we wonder, which of the above hypotheses should and will actually be the valid and deterministic argument for the year 2026.<\/p>\n\n
BASIC ASSUMPTIONS<\/h2>\n\n
In order to assess the respective impacts of the above listed factors, we invite the reader to note and assess the developments in the chart of 10-year government bond yields for Switzerland, Germany, the United Kingdom, Japan and the United States. To illustrate the latest developments, we have indexed the respective interest rates to 1 as of November 3, 2022. We deem it worthwhile to recall the starting values of the single interest rates as of November 3, 2022:<\/p>\n\n
\u00a0<\/td> GSWISS10<\/strong><\/td> GDBR10<\/strong><\/td> GUKG10<\/strong><\/td> GJGBB10<\/strong><\/td> GT10<\/strong><\/td><\/tr> Nov 3, 2022<\/td> 1.327<\/td> 2.245<\/td> 3.575<\/td> 0.246<\/td> 4.134<\/td><\/tr> Apr 30 2026<\/td> 0.391<\/td> 3.0348<\/td> 5.038<\/td> 2.522<\/td> 4.395<\/td><\/tr> %<\/td> -70.54<\/td> 35.18<\/td> 40.92<\/td> 925.20<\/td> \u00a06.31<\/td><\/tr><\/tbody><\/table><\/figure>\n\n Concerning the impact of monetary policy, as a deterministic investment guide, we believe that the current interpretation based primarily on actual data cannot be assumed to be a consistent and promising forecastig policy indicator. Against this backdrop, we wonder why the vast majority of forecasters continue to focus on interest rate policy to master the current stalemate?<\/p>\n\n
No doubt at all, the data of the recent whereabouts of the 10-year government bond yields show significant and deterministic differences between the quoted yields. The real question is: What does the graphic really suggest? Does it represent something different from what is regularly reported in the media? We believe that the chart illustrates the risk that could arise if the impact of interest rate changes are talen as a guide for the near futurecase. Nevertheless, we invite readers to examine the different trajectories presented, in order to better assess the growth curves and coherent effects. On our part, we deduce the following:<\/p>\n\n
- \n
- The evolution of Japanese 10-year yields is undoubtedly astonishing, as compared e.g. to the opposite trend in German yields. We wonder what consequences this has or could have for investments in Japan as compared to Germany.<\/li>\n\n\n\n
- Yields in Switzerland and in the USA were surprisingly stable. Do the respective developments indicate a corresponding reaction to a different environment?<\/li>\n<\/ul>\n\n
As for the impact of monetary policy as a promising investment guide, we believe that the current interpretation based on actual data cannot be considered a consistent and promising forecasting policy indicator. Against this backdrop, we reiterate the question as to why the vast majority of forecasters continue to focus on interest rate policy to break the current stalemate.<\/p>\n\n
SHORT-TERM OUTLOOK<\/h2>\n\n
The chart points to significant and deterministic differences between the respective yields of 10-year government bonds. The real, contextual question is: What does the graphic suggest? <\/p>\n\n
We believe the chart illustrates the risk that could arise when interpreting the impact of interest rate changes, as is currently the case, based on changes in 10-year Treasury yields as a guide for the near future. Nevertheless, we invite readers to examine the different trajectories, shown in order to better assess their growth curves and coherent impacts. A closer analysis of the available data suggests the following:<\/p>\n\n
- \n
- With the development of Japanese 10-year yields, compared to the reverse development of German yields we ask ourselves what the consequences of making investments in Japan vs. Germany are or could be?<\/li>\n\n\n\n
- In the analyzed period, the development of yields in the United Kingdom and the USA has been rather stable. Do the respective representations indicate a corresponding answer to a different environment, or do they point to something different?<\/li>\n\n\n\n
- The developments of Swiss government bonds are not entirely, in line with public opinion.<\/li>\n<\/ol>\n\n
Regarding the impact of monetary policy management as a promising investment guide, we believe that the current interpretation, based on actual data, cannot be considered a consistent and promising policy indicator. In context, once again, we wonder why the vast majority of forecasters continue to focus on interest rate management to resolve the current stalemate, instead of setting the focus on the inflation whereabouts?<\/p>\n\n
OUR EXPECTATIONS<\/h2>\n\n
Given the aforementioned political, economic and social environment, the outlook looks like a “very complicated and quite difficult task\u201d. After a thorough examination of recent developments of 10-year Treasury yields, we ask ourselves the following question: Will inflation really be the main enemy of policymakers and\/or investors, or will it be something else? Any suggestion?<\/p>\n\n
If the authorities remain focused on fighting inflation through short-term interest rate control, the outlook for investment is expected to remain rather subdued.<\/p>\n\n
Why, one might ask?<\/strong><\/p>\n\n
In times of war, the ongoing Russian invasion of Ukraine, and similarly absurd developments in the Middle East, and elsewhere, one might wonder how changes in interest rates could lower the price of crude oil? We should not forget that two of Europe’s largest economies (France and Germany) are in a very complex political situation, namely a serious lack of economic, social and political leadership. Concerning investments, we consider this context as quite problematic, if not dangerous.<\/p>\n\n
However, if investors continue to focus on sectors such as technology, as has been and should remain the case, in the USA, the outlook could “brighten” significantly. Nevertheless, at this crossroads, we cannot predict what the U.S. government will do, as its “America First policy” is at the forefront.<\/p>\n\n
CONCLUSIONS<\/h2>\n\n
Despite all the forecasting difficulties, we prefer the Swiss franc and the domestic market, mainly for reasons of efficiency. We expect the CHF to remain in high demand. As can be deduced from the general conditions mentioned above, a highly deterministic factor is the war against Ukraine and in other Middle East nations, especially for security reasons, given the devastating, destructive importance of the availability of raw materials such as gas and crude oil.<\/p>\n\n
Despite fears of USD weakness against our own currency, international diversification remains crucial, especially in connection with technological developments. As far as EUR exposure is concerned, we are somewhat concerned about the political uncertainties in France and Germany.<\/p>\n\n
While many analysts are eagerly awaiting monetary policy measures and central bank reactions, we fear unprecedented actions from the US president, whose recent tax reform has had \u2013 and probably continues to have \u2013 a fairly negative impact on economic activity.<\/p>\n\n
What we should keep in mind is the implicit lesson from recent interest rate trends as shown in the chart above, which tells us the importance of developments in exports and imports, including Trump’s jargon. One of the lessons I learned a long time ago at Georgetown University in Washington D.C. is to thoroughly analyze economic facts before making a coherent decision.<\/p>\n\n
Sorry, that we couldn’t present a more promising perspective. Nevertheless, we look forward to your comments.<\/p>\n
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