Market update: geopolitical tensions weigh on financial markets

After a positive start to the year with two strong investment months, a broad market correction has taken place since the end of February. The main reason for this is the increase in tensions regarding Iran. The blockade of shipping exports through the Strait of Hormuz has reduced the supply of oil and gas, which has led to a rise in short-term energy prices and higher inflation expectations. As a result, interest rates in Europe and the United States have increased, tightening financing conditions and putting pressure on bond prices. Both global equity markets and gold also have recorded significant losses in certain cases.

Historically, geopolitical crises have usually had only a temporary impact on global financial markets. We believe the recent fear that interest rates will have to be hiked is exaggerated and expect the market to recover in the medium term. In the short term, however, the situation remains tense and difficult to predict. In mid-March we increased our exposure to Swiss equities, as they were relative underperformers during the recent downturn. At the same time, we reduced our exposure to US equities and, as a consequence, to the US dollar. We are currently reviewing additional selective buying opportunities.