Input 17.05.2021

“The thing that doesn’t fit is the thing that’s the most interesting: the part that doesn’t go according to what you expected” Richard P. Feynman, American Physicist

Good day,

Global equities realized a positive performance since the start of 2021 and reached new all-time highs. The positive momentum was supported by good company news as earnings expectations were largely exceeded. So far almost 9 out of 10 companies have reported a positive earnings surprise and three out of four have reported a positive revenue surprise. This marks the highest percentage of S&P 500 companies reporting a positive surprise since tracking began in 2008. The earnings growth rate for the S&P 500 reached almost 50% and marks the highest year-over-year growth rate for more than 10 years. Despite this impressive numbers the valuation of the equity market in the US reached 21.6 times forward earnings. This ratio is above the 5-year average (17.9) and above the 10-year average (16.0).

Global bonds on the other hand realized a negative performance so far with yields and interest rates increasing substantially. The development was driven by inflation expectations that continued to rise and, in the USA, reached levels last seen in 2013. Raw material prices indicate further price pressure, as for example copper is quoted above 10,000 for the first time since 2011, crude oil rose again to 70 and grain prices have doubled compared to the previous year. Inflation was also the big buzzword of the reporting season. In their reports, companies made various statements on the subject due to logistics restrictions, rising input costs and general price increases.

Economic data confirmed the ongoing recovery. The US economy grew by over 6% in the first quarter thanks to high consumer spending. This dynamic could even intensify in the current quarter. The expansionary monetary policy has been confirmed until further substantial progress has been made to improve economic development, which refers primarily to the employment situation.

So far, financial market investors have shown little concern about a potential rise in inflation. On the one hand, the expectation dominates that the upward pressure on prices will be temporary. On the other hand, it is assumed that the companies will be able to pass on the price increases due to the strong demand based on the confidence that the economy will recover significantly as a result of further reopening measures.

For weeks, tensions have been building between Israelis and Palestinians in Jerusalem, with a confluence of recent events and longer-term trends leading to the latest violence. Israeli restrictions around holy sites during Ramadan; increasingly intense protests and violence on both the Israeli and Palestinian sides, with each side blaming the other for initiating; and a court decision, now under higher court review, to remove Palestinian families from an East Jerusalem neighborhood preceded this latest round of conflict — the most violent since the 2014 Gaza war. As has been the case many times before, the Israeli-Palestinian conflict will not settle into a frozen one, able to be cast aside by the international community. Rather, without active measures to address flashpoints and convince publics that peace with the other is possible, events could spiral out of control.

The recent attack on the Colonial Pipeline, a critical part of U.S. petroleum infrastructure, which hit critical national energy infrastructure may represent a new level of ransomware, but there is one aspect to the vulnerability exposed in U.S. defenses that is a reminder of what experts already knew: the federal government and private enterprise have struggled for decades to build a deeper relationship on cybersecurity to stay ahead of accelerating, and more advanced threats. hack raises a different set of issues, including government and industry debate over whether to pay the ransom demanded by hackers. As one of the consequences there will be global focus on strengthening cybersecurity through all the sectors.

Please challenge us with your view on the situation, since our way to reflect does only cover a part of a complexe theme.

Best wishes for good health