I admire the confidence with which economists are forecasting the rate-hike picture a year from now. Especially after even central banks realise they have not been able to predict it in the past ten years. But that does not prevent some pundits from forecasting five rate hikes in the US in 2022. Some are even going for seven. The more the merrier. For those advocating for humility, given that the same crowd called for a bare two rate hikes only six months ago, please remember: fluctuations – also in terms of opinions – are good for business.

12 months from now

Speaking of being humble, we do not rule out that the rate environment will look quite different 12 months from now. We just think it is more likely that changes will be frontloaded than that they will be as lasting as some think. In other words, the Fed will move and then watch how the changes go down with the economy and markets. Yet we doubt the ECB will follow anytime soon.

The real surprise

The other pain point is geopolitics, of course. We formalised our scenarios around the Ukraine conflict by attributing the highest probability to a limited escalation. That could still lead to further spikes in energy prices, but we expect them to be short-lived. The real surprise would be an outcome that is hardly covered by the media: a US-Russia deal behind the scenes that sees them teaming up against China – something that is very much up the alley of the US government and would allow Russia a face-saving pull out of the situation.

Conclusion for investors

This leaves us with the earnings season. Corporate profit numbers no longer move the needle, not even at a singlestock level (see number of the week). It is therefore time to adjust exposure to single names after the recent moves.

Number of the week