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The peak of peaks

When reading analyst comments, one finds an abundance of peaks and troughs. No wonder everybody thinks that stock markets are like roller coasters and mountaineering – exhausting both physically and mentally.

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Adding to that notion, the coming weeks may show quite a few peaks in recent trends. In particular, inflation rates are in for a … you guessed it … peak. We highlighted this in the past weeks by pointing to some of the leading components in inflation that are showing signs of a slowdown, like energy prices. Now, the latest reading of US retail sales shows that consumer demand has likely peaked too. While output numbers for the US may still look strong for Q4 2021, the first quarter of 2022 may be rather soft (see number of the week). This may alleviate some of the immense pressure that is weighing on the US central bank to deal with inflation.

Head of Research Christian Gattiker recommends creating a strategy to "put excess cash to work"
The beauty in financial markets

The beauty in financial markets is that when you spot peaks, you most often tend to find some troughs too. China is a candidate here. Macroeconomic data has been on the soft side for quite a while, and the trouble in real-estate markets has been holding back investor confidence too. While Chinese real estate may not be out of the woods yet, the latest policy shift towards more generous support adds some oxygen. The same holds true for some of the beaten-down smallcap growth stocks, most notably in the US. While a new boom market is not visible yet, the relentless selling is likely easing, and a bottoming process is on the cards.

Conclusion for investors

Where does that leave investors for now? We see that the relief rally in value stocks has run most of its course (i.e. it appears to be peaking). Yet some tactical opportunities remain for now, particularly for financials and commodity stocks.

Number of the week

How should you position your portfolio in the view of Julius Baer's experts?

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