We have sent our last newsletter after stock markets had an extremely strong first month of the year. At no surprise markets have calmed down and came down again in the following months. Thus February and March offered some attractive buying opportunities due to increased volatility and lower price levels. Overall stock markets have been oscillating sideways.

US interest rates have continued to increase in every single month since September last year. Year-to-date 2018 the increase is about 70 basis point for US Treasuries – both 2-years and 10-year maturity. The rest of the developed world is lagging far behind. While the US Fed has been increasing its target rate since late 2015 the ECB is still observing or taking a run-up it you like.

The big winner in year-to-date statistics as well as in a rolling 12-months window is: crude oil. This is good news for our clients since Oil&Gas has been our biggest picks for several quarters. While many analyst have predicted an era of low energy prices to persist due to productivity world-wide gains, eroding OPEC power, exploding US shale production figured etc. it looks like market participants are buying and paying a different view. Yes, there have been considerable geopolitical turbulences like Venezuela heading to bankruptcy and the Middle East shaken up by apocalyptic chaos in Syria and the US pushing Iran closer to war. At bottom line the spot price for a barrel crude oil has increased to $72 from $50 12 months ago and the contract curve has changed from contango to backwardation. This change is caused by stronger than average increase of prices for current supplies versus long-term supplies.

Erwin Lasshofer and his INNOVATIS team expect geopolitical turbulences to continue. Unfortunately crazy and powerful political leaders benefit from populist propaganda like restricting global trade, exchange and partnership. This permanent danger gives energy a strong strategic value. Further it limits growth which might keep inflation under control. If increasing protectionism does not drive prices to high interest rate hikes should be limited. Since many leaders consider themselves being involved in a global currency devaluation fight are not interested in higher rates anyway. At bottom line expect moderate and volatile growth to continue.



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