Navigating Europe's Financial Turbulence: Opportunities Amidst the Uncertainty
Date of publishing: 24.02.2023
- Swift rate hikes and an energy crisis have put considerable pressure on the European economy.
- However, a tempering gas price caused by the mild winter, declining inflation rates and a robust labour market have raised prospects of avoiding a recession
- Market sentiment seems to be divided, with markets pricing in high risks despite responding optimistically to economic data.
- Higher policy rates have ended “TINA” – bonds are back.
- For European investors, local bonds appear more attractive due to currency risk as well as elevated hedging costs.
- IG offers more favourable conditions, having wider spreads, significantly lower default risk and a unique risk-reward positioning.
The Energy Crisis
The EU's diversification away from Russian gas
European Natural Gas Storage Levels
Purchasing Managers‘ Index
Market Sentiment Analysis
Web scraped tweets analysis
One of the worst years in history for portfolios
Annual returns for bond and 60/40 portfolios
Bonds compared to Equities
Treasury yields against S&P 500 average dividend yield
Historical bond default rates and outlook
Europe vs US
EUR/USD and the hedging cost
HY vs IG
Yield & Spread Analysis
Risk-return structure of various bond types
Disclaimer The information set forth herein has been obtained or derived from sources generally available to the public and believed by the authors to be reliable, but the authors do not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with WUTIS – Trading and Investment Society e.V.