Cross-Asset Weekly

10 November 2023

Contacts
Macro and Strategy Outlook 2024
Dr. Karsten Junius, CFA
We believe that 2024 will be increasingly marked by the cumulative effects on the real Chief Economist
economy of the rapid and sharp monetary tightening implemented by developed market [email protected]
central banks over the past 18 months. Financial conditions have tightened significantly +41 58 317 32 79
and central banks generally share the view that the peak impact of past monetary tight-
ening still lies ahead of us. But central banks will also want to see clear evidence pointing Raphael Olszyna-Marzys
to a sustained return of inflation to 2% before easing policy. We expect the first rate cuts International Economist
in the third quarter of 2024, but they will likely be more gradual than in previous cycles. [email protected]
+41 58 317 32 69
We retain a constructive outlook for fixed income for 2024 and into 2025. Developed mar-
kets’ rates structures have repriced sharply over the past 18 months and provide a mean- Mali Chivakul
ingful cushion against adverse yield moves. We expect lower bond yields over the next 6 Emerging Markets Economist
to 12 months and prefer intermediate maturities. Credit spreads remain below historical [email protected]
medians. Hence, they do not price a meaningful economic slowdown. We retain a prefer- +41 58 317 33 01
ence for Investment Grade over High Yield.
Alex Rohner
We expect the US dollar to weaken and remain cautious on the British pound. The yen Fixed Income Strategist
should rise markedly in the coming year, but also the euro and the Swiss franc should be [email protected]
well supported. Lower real rates in 2024 will likely be a tailwind for gold. +41 58 317 32 24

Finally, we retain a cautious view on global equities as the US market in particular is priced Dr. Claudio Wewel
for a very favourable economic development. Within the equity space, we find the euro FX Strategist
area and Switzerland attractive. We prefer sectors that usually benefit from lower rates [email protected]
and hold up even if the business cycle were to slow. These include typical defensive sec- +41 58 317 32 26
tors such as staples and health care, but also utilities.
Wolf von Rotberg
Equity Strategist
[email protected]
Risks shifting from high inflation to high financing +41 58 317 30 20

costs
Macro and Strategy Outlook 2024 3

Global macro 3

Fixed income 12

FX 14

Equities 15

Economic Calendar 19
Week of 13/11 – 17/11/2023

Market Performance 20
Global Markets in Local Currencies

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Macro and Strategy Outlook 2024

Dr. Karsten Junius, CFA The global economy surprised by its resilience in 2023. But the impact from tight mon-
Chief Economist etary policy is likely to be more visible through 2024. Ongoing structural changes will
Raphael Olszyna-Marzys probably cushion some of the negative implications for labour markets. Still, unem-
International Economist ployment is likely to rise over the coming quarters, with growth falling below advanced
Mali Chivakul economies’ potential rates. Fiscal expansion in China is likely to offset this only partly.
Emerging Markets Economist As economic slack opens up, disinflation should continue albeit at a gradual pace. As
Alex Rohner a result, major central banks are unlikely to push rates any higher , but we expect the
Fixed Income Strategist first rate cuts in the third quarter of 2024 only. Policy easing should be more gradual
Dr. Claudio Wewel than in the past given more persistent underlying inflationary pressures. We retain a
FX Strategist positive outlook for fixed income for 2024. We expect lower bond yields over the next
Wolf von Rotberg 6 to 12 months. We also retain our preference for Investment Grade over High Yield.
Equity Strategist In the currency space we expect the dollar and the British pound to suffer from lower
policy rates in 2024, while we expect gold to do well as real interest rates move lower.
Finally, we retain our cautious view on equities as the US equity market in particular
is priced for a very positive economic scenario. Within the equity space we find Swit-
zerland attractive and focus on sectors, which usually benefit from lower rates and
hold up even if the cycle were to slow. These include sectors such as staples and
health care, but also utilities. (See forecast overview table on page 17)

Global macro

Can the global economy remain as resilient The global economy and particularly the US have been much more resilient to higher in-
in 2024 as it was in 2023? We are inclined to terest rates than we had anticipated. Looking back in history, a monetary tightening cycle
believe that it will not of such amplitude should have resulted in much weaker economic activity and a rise in
joblessness (Exhibit 1). Instead, unemployment has stayed low, while inflation has fallen
in all advanced economies. And even in sectors where activity has slowed, such as man-
ufacturing, the ‘hard’ data have in general been stronger than surveys had indicated. The
outlook for the global economy and financial markets hinges on whether this resilience
can persist. This requires us to understand why the economy has managed so far to shrug
off the sharp increase in interest rates. We are inclined to believe that the current situation
is looking too good to last for very long.

Exhibit 1: The sharpest hiking cycle since the 1980s was met with resilient growth

Source: Macrobond, Bank J. Safra Sarasin, 07.11.2023

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Persistent strength would imply that the One possible answer is that the structure of the word economy has fundamentally
structure of the economy has fundamentally changed to one with a lower sensitivity to tighter monetary policy. This would imply that
changed the neutral interest rate, the equilibrium rate that balances the world’s desire to save and
to invest, has risen significantly. As a result, the economy would require much higher pol-
icy rates to slow down to potential growth.

The global economy has changed in some as- Important structural changes have indeed been ongoing under the surface for some time.
pects. Adverse demographic trends suggest It is becoming increasingly clear that the pandemic and acute geopolitical tensions have
that the labour market will remain structur- accelerated them. First demographics. True, this is nothing new. Dependency ratios
ally tighter troughed in the decade prior to the pandemic in major economies, according to UN esti-
mates. They have risen for the past years and projections show that the ascension is set
to continue (Exhibit 2). The pandemic has likely brought this trend to the fore. Companies
have been scarred by the inability to re-hire enough workers after the pandemic. Looking
ahead, they are probably less inclined to let go of their staff as rapidly as they used to,
since labour scarcity will only get worse. In the US, many workers aged 55+ have left the
labour force since the pandemic. So far, they have shown little inclination to come back.
But if job security has risen for those in the labour force, households might not have to
save as much as in the past. The savings ratio therefore might be structurally lower and
the marginal propensity to consume higher (Exhibit 3).

Exhibit 2: The dependency ratio is set to increase rapidly Exhibit 3: Savings rates could remain structurally lower

Source: Macrobond, Bank J. Safra Sarasin, 07.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 07.11.2023

AI should boost productivity growth One way to deal with labour scarcity would be to boost labour productivity. Recent ad-
vances in Artificial Intelligence (AI) are therefore encouraging. But AI could also contribute
in raising the neutral rate. Indeed, when people expect their real wage to rise over time,
they have less need to save today. Companies expecting higher sales could become
keener to invest too.

Governments will need to spend a lot more in Another fundamental change that the last two years have brought to light is the return of
the future the so-called ‘big government’. Russia’s invasion of Ukraine has put an end to the post-
cold war peace dividend. Western nations will need to spend and invest several additional
percentage points of GDP over the coming years to rebuild their armies and their military -
industrial complex. Bringing strategic industries closer to home, ‘de-risking’ supply chains
as well as investing for the green transition will also require a huge amount of public and
private investment. The IMF calculates that annual bill for governments to pay for all of
this will amount to about 7.5% of rich countries’ GDP in the coming decade.

All of this should lead to a higher neutral rate Fewer savings and much larger investment needs suggest that the multi -decade down-
ward trend in the equilibrium neutral rate has likely ended. What is much more uncertain
is the extent to which this unobservable variable has risen.

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But the policy stance is still tight even if we Fed officials are inclined to believe that in the US, the short-term neutral rate might be
assume a higher neutral rate around ½ percentage point higher than a few years ago. Our best guess is that the neutral
policy rate across all major advanced economies has risen by the same amount, given
that a lot of the forces that we describe above are global. Even if we were to assume that
it has risen by twice as much, the stance of monetary policy, the difference between the
policy rate and the neutral rate, would still be historically tight (Exhibit 4).

Exhibit 4: Monetary policy is tight even with a higher neutral rate

Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023

So, the resilience of the global economy in If the ongoing structural changes are not the main force behind the ongoing resili ence of
2023 largely rested on transitory factors. We the global economy, other transitory factors must be behind that relative strength. In the
see three: case of the US, a big and unexpected fiscal expansion directly supported growth. A further
unwinding of pandemic-related distortions to demand and supply also played an im-
portant role in boosting world economic activity and reducing inflationary pressures.
These forces have largely run their course, in our view. This means that the outlook for the
economy largely depends on the lags between past monetary tightening and economic
activity. Let’s explore these different dynamics in more details below:

(i) A much looser-than-expected In its latest Fiscal Monitor, the IMF revised up considerably its 2023 estimate for the US
US fiscal stance primary deficit to 5.5%, from 3.8%. The fiscal impulse for the country in 2023 (what dis-
cretionary fiscal policy has likely added to GDP) amounts to 1.9%. In most other advanced
economies, it is negative. The US numbers don’t even consider the tax credits, subsidies
and other incentives imbedded in the Inflation Reduction Act (IRA) and the CHIPS Act de-
signed to attract investment on US soil in battery and semi-conductor factories. The rise
in construction spending on manufacturing structures this year has been impressive, and
probably added about ½ percentage point to GDP (Exhibits 5-7).

The US fiscal stance in 2024 is likely to be The Fed’s own indicator of financial conditions suggests that its monetary stance probably
neutral, at best chipped away 1 to 1.5% from GDP this year, thus not enough to offset the 2 to 2.5% fiscal
boost. Looking into 2024, both the IMF and the Congressional Budget Office expect the
impulse to turn negative. The White House has some leeway to delay this expected fiscal
consolidation. But the historically high deficit and rising interest rate expenses most likely
imply that this leeway will be constrained. Further flows into manufacturing structures are
expected to persist. But for growth, what matters is the rate of change in those flows.
Given the almost exponential increase this year, it is hard to imagine that they can
strengthen significantly from current levels (Exhibit 7).

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Exhibit 5: US fiscal exceptionalism Exhibit 6: US fiscal impulse to turn negative Exhibit 7: IRA and CHIPS Act in action
Fiscal impulse for 2023

US

Switzerland

Euro area

UK

Japan

-1.0 -0.5 0.0 0.5 1.0 1.5 2.0

Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023

(ii) A rebalancing of demand away The rebalancing of demand also appears to have muted the impact of tighter monetary
from credit-sensitive sectors policy and weaker credit flows on growth, both in the US and Europe. The release of pent-
has muted the impact of higher up demand for services, such as concerts, dining out and travelling, has meant that con-
interest rates sumer spending has remained relatively resilient. In contrast, activity in credit-sensitive
sectors, such as housing, contracted in the previous 18 months (Exhibit 8). While con-
sumer appetite for services appears to remain relatively large, the level of spending is
back to its pre-pandemic trend in the US and some European countries. This suggests that
the potential catch up, or ‘revenge spending’, on experience is more limited over the com-
ing quarters (Exhibit 9). High financial costs have also sapped consumers’ appetite to buy
durable goods over the coming year, according to surveys on both sides of the Atlantic.

Exhibit 8: Investment fell but consumer spending was resilient Exhibit 9: Pent-up demand for services has shrunk

Source: Macrobond, Bank J. Safra Sarasin, 09.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 09.11.2023

(iii) An unwinding of supply-side Finally, the unwinding of pandemic-related supply constraints and the decline in energy
constraints prices have helped boost supply this year and reduce inflationary pressures. The car in-
dustry is a good example, where production both in the US and Germany have tracked the
New York Fed global supply chain pressure index (Exhibit 10). But with the index back at
its historical lows, the supply-side of the economy has already largely normalised. In short,
there is no huge amount of additional pent-up supply to be released.

The normalisation process of the economy is These trends are visible in price dynamics, too. The combination of stronger supply and
also reflected in relative price changes the normalisation of consumer spending shifting back towards services has led to a sharp
drop in goods inflation this year, but pushed up services inflation in all major advanced
economies (Exhibit 11).

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Exhibit 10: Unwinding of supply constraints boosted activity Exhibit 11: Price dynamics reflect a normalisation of the economy

Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023

The standard sequence of events following a If the lagged effects of past tightening are still to feed through in their entirety, aggregate
tightening of credit supply still appears to be demand should deteriorate once the economy has fully normalised. There tends to be a
holding up standard sequence of events that follows a tightening of loan or credit supply: first, mar-
ginal borrowers have trouble rolling over credit; second, signs of credit stress emerge,
including higher delinquency rates and corporate bankruptcies; finally, those pressures
feed into weaker demand and a softer labour market. That sequence still appears to be
holding up. Corporate bankruptcies in America are on course to hit their highest level since
2010. Insolvencies have already reached a post-financial crisis high in the UK and have
surged in the euro area. What’s more, delinquency rates are rising on auto loans and credit
cards. Even a softening labour market looks consistent with the normal lags between
tightening credit conditions and a weaker economy (Exhibits 12 and 13).

Exhibit 12: Tighter lending standards to push up US unemployment Exhibit 13: Tightening also to push up euro area unemployment

Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023

Unemployment should rise as demand slows, The growth outlook in the US and Europe thus depends, to a large extent, on the degree
but probably less than in previous cycles to which unemployment will increase. Indeed, economists typically describe recessions as
non-linear events as a rise in unemployment leads to less spending, more bankruptcies,
new rounds of lay-offs and so forth. But as we argue above, if companies have become
more concerned with a structurally tighter labour market, they might be more hesitant to
lay off workers. This concern could be more pronounced in the euro area, where demo-
graphic trends are the most adverse and labour markets rather inflexible.

There are plenty of signs suggesting the US In the US, the pace of net job growth, as measured by payrolls has declined significantly
labour market might not be as strong as gen- over the last two years, and has recently fallen into the range where it’s mostly just keep-
erally perceived ing up with population growth. The surge in quits rate has ended, while the hiring rate has

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declined substantially and is back to its pre-pandemic average. Early indicators, such as
payrolls growth in temporary help service have turned negative (Exhibit 14). Slowing job
and wage growth means that aggregate labour income has decelerated substantially and
is now close to its pre-pandemic average. Finally, firms’ hiring plans have fallen steadily
over the last few years. Importantly, the unemployment rate, which is based on the house-
hold survey, has already increased by 40bp from its trough to 3.9% in October. Historically,
whenever the 3-month moving average of the unemployment rate rose by more than 50bp
above its 12-month rolling through, unemployment shot up, precipitating the economy
into recession (Exhibit 15).

We expect the US to fall in a mild recession We expect US growth to slow materially over the coming quarters and the economy to fall
around the middle of next year into a mild recession around the middle of 2024. The recovery that we anticipate to start
in the final quarter of the year is likely to be relatively slow too. US economic activity should
expand by 1% in 2024 and 1.4% in 2025.

Exhibit 14: US employment growth has weakened Exhibit 15: US unemployment rate could soon cross a threshold

Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023

The euro area is likely to stay in stagflation In the euro area, a lack of workers remains a key factor limiting production, despite weaker
demand. This goes a long way towards explaining why the unemployment rate has trended
lower over the past year. A structurally tighter labour market should prevent unemploy-
ment from shooting up. In addition, the drop in headline inflation and positive real wage
growth should support consumption somewhat next year (Exhibit 16). These are important
reasons underlying our view that the bloc might see a prolonged period of very weak
growth rather than a more abrupt but perhaps shorter period of economic contraction. If
our forecasts turn out to be correct, the economy will have expanded at a sub-trend pace
for eight consecutive quarters. But despite these structural concerns, the unemployment
rate will most probably increase further in the coming months, opening some slack in the
economy. We expect GDP growth to average 0.8% in 2024 and 1% in 2025. Besides weak
growth we are worried about the material increase in bond yields that will increase gov-
ernments’ interest expenses significantly over the coming years. As pension, defence and
infrastructure spending will need to increase as well, fiscal sustainability is likely to be-
come more challenging for some highly indebted countries.

The Swiss economy should remain weak at Switzerland’s GDP growth is likely to remain weak at least through the middle of next year.
least through to the middle of next year Private consumption should remain subdued on the back of higher administered prices
that push up inflation rates above 2% again and a weaker labour market. Unemployment
has already started to rise, reflecting greater flexibility and perhaps less adverse demo-
graphic trends, and is likely to pick up further (Exhibit 17). With growth in the rest of Europe
and in China expected to remain weak, alongside the strong Swiss franc, the external

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sector is unlikely to provide much of a lift. GDP will expand by 0.8% in 2024 and 1% in
2025, in our view.

Residential investment should depress UK Finally, there are more signs in the UK that sluggish growth over the past year is feeding
GDP growth in 2024 through to the labour market. According to the latest Bank of England (BoE)’s Decision
Maker Panel survey, recruitment difficulties were either normal or easier than usual for
about half of the companies surveyed. In contrast, at the start of the year between 70%
and 80% of companies struggled to hire staff. BoE staff estimates that only about half of
the impact of the cumulative tightening on GDP has been felt to date. Residential invest-
ment is likely to be particularly weak next year (Exhibit 18). We expect the economy to
largely move sideways over the coming quarters. GDP growth should average 0.2% in
2024 and 1% in 2025.

Exhibit 16: Real wages to support activity Exhibit 17: Swiss unemployment is going up Exhibit 18: UK investment to contract

Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023

We expect core inflation to trend down in Eu- Weak economic growth and a further rise in unemployment in 2024 should open up some
rope and the US next year economic slack and weigh on inflation in the US and Europe. We expect wage growth and
core inflation to trend down over the coming two years (Exhibit 19). Still, inflation is un-
likely to move down in a straight line and will most likely be bumpy. Geopolitical tensions,
and a potential rise in the oil price is an important risk to our view.

Exhibit 19: Core inflation rates should trend down over our forecast horizon

Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023

Japan’s economy stands out, as it is largely The one economy that stands out in our forecasts is Japan. This shouldn’t come as a sur-
catching up prise. While all major central banks have tightened policy aggressively over the past 18
months, the Bank of Japan (BoJ) has kept its policy stance extremely accommodative. This
has led to a sharp depreciation of the yen, boosting net exports. We expect GDP to grow

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again above its trend rate in 2024, at 0.9%, following a likely very strong expansion in
2023 (1.9%). This reflects still-loose monetary policy, continued fiscal support to offset
the negative impact from higher energy prices and a likely big increase in wages following
the next round of wage negotiations in spring. As a result, we expect Japan’s inflation to
remain relatively sticky next year, and above the BoJ’s 2% target.

Major central banks should keep rates un- So, what are central banks likely to do? In our view, all the major ones have probably
changed until 3Q24, then loosen policy only reached the end of their hiking cycle. Financial conditions have tightened significantly in
gradually. The BoJ should lift its policy rate in the past few months, and all share the view that the peak impact of past monetary tight-
spring ening still lies ahead. Still, we expect them to keep a hawkish bias and to wait for plenty
of evidence pointing to a sustained return of inflation to 2% before cutting rates . We an-
ticipate the first rate cuts to take place in third quarter of next year. But central banks will
probably ease policy rates more gradually than in the past as underlying inflationary pres-
sures are likely to be more persistent. Finally, we anticipate the BoJ to end negative inter-
est rate policy in spring next year, and to gradually lift its policy rate to 0.3% by year end.
The ‘Shunto’ wage negotiations should be the key trigger, confirming that inflationary
pressures are more ingrained and that the deflationary mindset has ended .

The Chinese economy will be driven by policy In China, we expect the economy in 2024 to be driven by policy support and services con-
support, services consumption and the hous- sumption, and still be dragged by the weak housing market. While the housing decline will
ing decline continue to weigh on growth and dampen overall sentiment, the drag should be less than
this year’s (Exhibit 20). China’s credit impulse has already turned positive in the third
quarter and should underpin investment activity in the coming quarters. The government’s
decision to increase the central government’s deficit by around 1 percentage point of GDP
and to frontload local government bond issuance sends a clear signal that it is committed
to stabilise near-term growth. We expect 2024 annual growth to decline to 4.5% from 5.2%
this year (Exhibit 21). On the domestic side, the risk that poor overall sentiment could lead
to a more severe housing decline remains. Further policy support will be needed if the
government wants to set a growth target of “around 5%”, similar to this year. Potential
growth over the next 2-3 years is set to decline to close to 4%.

Exhibit 20: Housing sales to bottom out at the end of 2023 Exhibit 21: Policy support and service consumption to drive activity

Source: Macrobond, Bank J. Safra Sarasin, 07.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 07.11.2023

Risks to growth beyond a sharper housing de- China’s latest fiscal expansion to finance infrastructure investment like the reconstruction
cline include weaker global demand and of the flooded areas also suggests that Chinese policymakers continue to prefer to drive
more trade tensions domestic demand through investment rather than through consumption, which would re-
quire deeper tax cuts and social welfare reforms. Resource reallocation away from real
estate has gone into strategic manufacturing sectors (Exhibit 22). Without enough domes-
tic demand to absorb these products, China needs to rely on external demand. Indeed,
China’s trade balance has risen again since the pandemic and is now around $800 billion

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annually or about 5% of GDP (Exhibit 23). This is likely not sustainable given the currently
inward-looking political climate around the world. The 2018 US-China trade war came af-
ter the last peak of China’s trade balance in 2016, and during China’s last housing down-
turn.

Exhibit 22: Credit has shifted from real estate to manufacturing Exhibit 23: Large trade surpluses are not politically sustainable

Source: Macrobond, Bank J. Safra Sarasin, 07.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 07.11.2023

EM growth to slow and disinflation to con- Growth is also set to slow in major Emerging Markets (EM) economies in 2024 due to tight
tinue financial conditions and weaker global demand (Exhibit 24). But China’s growth stabilisa-
tion and the improvement of the global tech cycle are two important supporting factors.
Inflation in EMs should continue its downward trend as slack increases and supply -side
pressures wane in general, but there is a large variation among EMs (Exhibit 25). Some
EMs have already achieved their central bank targets (such as Indonesia and Thailand).
Some EMs that experienced high inflation in the past year (such as Colombia and Hungary)
will take some time to re-anchor inflation expectations even if their economies have
slowed significantly. Other EMs (such as Mexico and Poland) expect a positive fiscal im-
pulse next year which could prolong higher-than-target inflation expectations. For others,
higher food and/or energy prices (such as in the Philippines and South Africa) could still
push up headline inflation and generate a second-round effect.

Exhibit 24: Growth is set to slow next year in most EMs Exhibit 25: Inflation to remain above targets for some EMs

Source: Macrobond, Bank J. Safra Sarasin, 07.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 07.11.2023

EM central banks are more cautious with re- The Fed’s higher-for-longer narrative has made EM central banks more cautious in lower-
gard to easing policy ing their policy rates. External stability concerns have come to the forefront as capital
flows out of EMs. Central banks in Asia, where interest rate differentials with the Fed are
the lowest, have had to resort to hiking interest rates further (Indonesia and the Philip-
pines) and/or to intervening in FX markets and tighten domestic liquidity. They will likely

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stay on hold and wait for the Fed’s first cut. In Latin America, where interest rates are most
elevated, central banks have become more vigilant of adverse global financial conditions.
We can see this through Brazil’s latest minutes of the Monetary Policy Committee (MPC)
and Chile’s reduced pace of policy rate cuts at its most recent MPC meeting. We expect
the monetary policy stance in EMs to remain relatively tight through 2024.

Fixed income

2024 fixed income outlook is constructive We have a constructive outlook for the fixed income asset class for 2024 and into 2025.
Our view is based on the sharp repricing in developed markets’ (DM) rates structures over
the past 18 months, which culminated in a rapid and large increase in DM long-term real
yields in the 3rd quarter of 2023. While this latest rise in long-term yields has led to mea-
gre returns year-to-date, it further strengthens the constructive case for fixed income. In
particular, we would highlight the following points:

1. Valuations look attractive While forward markets priced hardly any rate hikes by developed markets’ central banks
in August 2020, market expectations have now flipped to the other extreme, with hardly
any rate cuts being priced. The US implied Fed Funds rate market is a case in point: It
prices the rate to trough at above 4% in this cycle and to rise again thereafter (Exhibit 26).
Clearly, this pricing is not consistent with a meaningful economic slowdown, let alone a
recession. The pricing is also inconsistent with the Fed’s estimate of a 2.5% to 3% nominal
neutral interest rate. Moreover, we note that developed markets’ long-term real yields, as
measured by inflation-linked government bond markets, are now at or above estimates of
long-run potential real growth rates (Exhibit 27).

2. The monetary policy stance looks tight The monetary stance of developed markets’ central banks is likely already tight. Again, the
US is a case in point: US 10-year real yields, as measured by the inflation-linked market,
are at their highest level relative to the Fed’s estimate of the real neutral interest rate
since 2007 (Exhibit 28). Sharply tightening lending standards, much weaker credit crea-
tion and rising delinquency rates on consumer and car loans clearly support the notion
that the monetary stance is starting to bite in the US.

Exhibit 26: Markets do not price a meaningful rate cut cycle Exhibit 27: Real yields at or above most estimates of potential growth
6.0 Long-term real yields, %
4.5
5.0
3.5
4.0 2.5
1.5
3.0 0.5
-0.5
2.0
-1.5
1.0 -2.5
-3.5
0.0
2006 2009 2012 2015 2018 2021 2024
2023 2024 2025 2026 2027
Market implied short term interest rate Fed September dot plot
US France UK

Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Bloomberg, Bank J. Safra Sarasin, 08.11.2023

3. Tighter monetary conditions will likely be The US economy has proven much more resilient to higher rates so far than anticipated.
felt increasingly over the coming quarters Nevertheless, we expect the cumulative effects of tighter policy to become more evident
in the US over coming quarters as fiscal support could turn into a drag next year. In the
euro area and the UK, where fiscal support has been less prominent in 2023, the impact

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of tighter policy is already much more visible. Increasingly, the market’s focus will shift
from inflation to concerns about the negative effects of higher rates.

Exhibit 28: US monetary policy is likely already tight Exhibit 29: A rise in default rates usually leads to spread widening
2.0 default rate global High Yield, %

1.0 20.0

0.0 15.0

-1.0 10.0

-2.0
5.0
-3.0
1999 2002 2005 2008 2011 2014 2017 2020 2023 0.0
2000 2003 2006 2009 2012 2015 2018 2021 2024

US 10y TIPS yield minus estimated neutral equilibrium rate (Laubach Williams) Realised default rate Consensus for 2023
Consensus for 2024 Market implied default rate
Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Bloomberg, Bank J. Safra Sarasin, 08.11.2023

Credit spreads are below their historical me- Credit spreads of Investment Grade (IG) and High Yield bonds both trade below historical
dian, Investment Grade will likely do better medians. This implies that spreads do not reflect the risk of a substantial economic slow-
than High Yield down, let alone a recession. As an example, consensus expectations are looking for de-
fault rates of around 4.5% both in 2024 and in 2025, a sharp increase from 2022 and
2023. Sharp rises in default rates have usually been accompanied by a more meaningful
widening in spreads (Exhibit 29). The recent rapid increase in long-term real government
bond yields will likely tighten financial conditions further, raising the risk of more pro-
nounced economic weakness than markets currently anticipate. Therefore, we retain our
preference for IG over High Yield and would generally stick to higher quality.

Intermediate maturities should do well over We expect lower nominal yields over the next 6 to 12 months in almost all developed cur-
the next 6 to 12 months, with limited down- rency spaces, with a more benign steepening of the yield curve. Intermediate maturities
side risk (5- to 7-year) are to be preferred: (1) they benefit from steeper yield curves, (2) they have
enough duration to profit from lower yields, and (3) current yields give significant downside
protection in an adverse yield scenario (Exhibit 30).

Exhibit 30: Attractive yields provide substantial cushion against adverse yield moves
Break-even yield increase over horizon (bp) Break-even yield over horizon (bp)
Duration YTM (bp) 3m 6m 12m 3m 6m 12m
US Treasuries 5.7 489 22 45 94 5.11 5.34 5.82
US Aggregate 6.1 550 23 47 99 5.73 5.97 6.49
US Investment Grade 6.6 621 24 49 102 6.45 6.70 7.23
US High Yield 3.6 937 68 140 303 10.05 10.77 12.40

EU Treasuries 7.2 371 13 27 55 3.84 3.97 4.26

EU Aggregate 6.3 387 16 32 66 4.03 4.19 4.54
EU Investment Grade 4.6 470 26 54 116 4.96 5.24 5.85
EU High Yield 3.0 838 73 153 338 9.11 9.91 11.76

UK Gilts 8.6 467 14 28 58 4.81 4.95 5.25

UK Aggregate 7.7 506 17 34 71 5.23 5.40 5.77
UK Investment Grade 5.8 637 28 57 119 6.64 6.93 7.56

EM Corporate (CEMBI) 4.1 797 50 104 221 8.47 9.01 10.18

EM Sovereign (EMBIG) 6.4 908 36 74 154 9.44 9.82 10.62

Source: Bank J. Safra Sarasin, 08.11.2023

A sustained decline in US rates should lead Emerging markets (EM) asset prices have been driven by high and volatile US rates in the
to better performance of EM assets past few months. Once there is a sustained relief in the US rates market , for example the
US labour market and macro data become consistently weaker, EM assets should look
attractive again. Despite a slowdown in EM growth, the EM growth differential to

13 | Cross-Asset Weekly
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10 November 2023

developed markets (DM), especially in EM Asia, remains high and carry remains attractive
in many EMs (such as Brazil, Colombia, and Hungary). Moreover, China’s improved out-
look, especially for the first half of 2024 when its fiscal expansion should kick in, should
help support commodity exporters as well as EM FX. We continue to prefer EM local cur-
rency bonds given sound fundamentals and our expectations that central banks (espe-
cially those with high policy rates such as in Brazil and Colombia) will continue or start
their rate-cut cycle before the Fed. When considering local currency bonds, there are some
selected country fiscal risks that could push bond yields up. There are concerns for exam-
ple that Brazil’s revenue targets for 2024 may not be met, while the large fiscal expansion
in Mexico would keep its policy rate higher for longer. In addition, weak revenues in South
Africa will remain a concern for 2024. While EM USD credit should also gain once US rates
ease, we could see another round of increase in credit spreads, especially among weaker
credit, as global growth slows and financial conditions remain tight.

FX
Three FX themes for 2024 In spite of some recent softness, the US dollar continues to be highly valued versus most
G10 currencies. This largely reflects the Fed’s comparatively tight monetary policy indi-
cated by the Taylor-rule implied policy rate spreads (Exhibit 31). In the coming year, we
think that three major drivers will dominate FX dynamics: (1) a dovish shift in central bank
policy, (2) elevated market uncertainty and (3) a moderate recovery of the euro area.

1. The advent of the Fed’s first rate cut his- In 2024, we believe that depressed personal savings and the negative net fiscal impulse
torically favours euro and Swiss franc. We ex- will lead to a more pronounced slowdown in US growth and eventually to a dovish shift in
pect the Japanese yen and gold to benefit central bank policy. On average, the Fed’s past five rate hiking cycles favoured both the
most, while we are cautious on sterling euro and the Swiss franc in the months before and following the Fed’s first rate cut. This
time around, we believe that within G10 FX, the Japanese yen should perform particularly
well against the US dollar once the Fed’s rate cuts are in focus (Exhibit 32). The yen should
also benefit from the end of the BoJ’s yield curve control policy, which we expect for H1
2024. Though to a lesser degree, a dovish shift in the Fed’s monetary policy stance should
also help Scandinavian currencies to rebound, which have suffered heavily from the policy
divergence between the Fed on the one side and the Riksbank as well as Norges Bank on
the other. Perhaps most importantly, we expect gold to be the primary beneficiary from
lower interest rates, given its high sensitivity to real yields. The precious metal’s past neg-
ative correlation with the US 10y TIPS yield suggests that it could rise by around 15% in
case real yields would drop by 100bps as we could see in the coming year (Exhibit 33). We
remain cautious on sterling, given the relative weakness of the UK economy.

Exhibit 31: Taylor rule suggests that Fed’s Exhibit 32: For the past 2 years, the USD-JPY Exhibit 33: Lower US real yields would push
monetary policy is comparatively tight pair correlated closely with carry gold markedly higher
G10 Taylor rule spreads, ppts
(Actual policy rate less Taylor rule implied rate)
CA US CH NO NZ EA JP SE AU UK
0

-2
-2.3 -2.3
-4 -2.9

-6
-5.5 -5.5
-6.0 -6.1
-6.5 -6.7
-8
-8.0
-10

Source: Bloomberg, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023

14 | Cross-Asset Weekly
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10 November 2023

2. Elevated market uncertainty to support More generally, we believe that market uncertainty is poised to remain high in 2024. In
safe havens particular, the likelihood of a recession in the US and various sources of geopolitical un-
certainty argue for a superior performance of safe haven currencies. Within G10 FX, we
expect both the Swiss franc and the Japanese yen to demonstrate their relative edge once
the slowdown of the US economy becomes more pronounced. Both currencies tend to be-
have very anti-cyclically and usually benefit on the back of lower US yields. With regard to
geopolitical uncertainty, we note that gold reacts very sensitive to geopolitical threats (see
last year’s gold valuation framework) as does the Swiss franc, which should create tem-
porary opportunities.

3. A moderate recovery of the euro area As a third key theme, we expect a moderate recovery in the euro area, which should sup-
should spur a rebound of its currency port the euro in the coming year. First, the data indicate that last year’s terms of trade
shock has largely reversed. Indeed, relative price changes are looking much more favour-
able for the euro area and suggest that EUR-USD should be somewhat higher (Exhibit 34).
Given that Chinese authorities recently demonstrated more willingness to support their
domestic economy, we also expect Chinese growth to stabilise into the coming year . This
should also support the euro on balance, along with the Australian and the New Zealand
dollar (Exhibit 35). Lastly, we also expect higher real wages to support a pick-up in private
consumption, which should additionally help to turn relative cyclical dynamics back in fa-
vour of the euro (Exhibit 36).

Exhibit 34: Terms of trade support the euro Exhibit 35: Euro is sensitive to Chinese cycle Exhibit 36: Relative dynamics to favour euro
Trade-weighted FX correlation with China Caixin Composite
PMI, 1-month lag, yoy changes, past 5 years
0.6 0.48
0.41
0.37
0.4
0.27

0.2 0.11 0.11 0.09

0.04

0.0
-0.03
-0.2

-0.4
-0.35

-0.6
AUD NZD EUR SEK NOK GBP CAD JPY CHF USD

Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023 Source: Macrobond, Bank J. Safra Sarasin, 08.11.2023

Equities
We remain cautious on the global equity market as we are approaching 2024. This view is
predominantly a function of US valuations which are priced for a very favourable macro
backdrop and, as such, are out of line with our own macro base case. Yet we think there
are opportunities within the equity market while we continue to have a preference for fixed
income. Hence, our ranking favours sectors that would benefit from lower rates. In terms
of regions, the euro area market is looking more attractive after its recent underperfor-
mance and given that it may receive some support from a stabilising cycle in China. Apart
from that, Swiss equities should benefit as rates headwinds are fading and Japanese eq-
uities may reverse some of their recent gains as the yen rebounds in a slowing global cycle.

US equities are priced for perfection The US equity market remains priced for a very favourable economic backdrop. The pre-
mium that equity investors can earn relative to US Treasury bonds over the coming 12
months is at the lowest level in 20 years (Exhibit 37). At these levels, equities only appear
attractive if GDP and earnings growth were to hold up and accelerate in the coming years.

15 | Cross-Asset Weekly
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10 November 2023

With US GDP growth increasing to almost 5% (annualised) in the third quarter, rec ession
fears have completely faded and market pricing has recovered to levels only seen during
the strongest of economic expansions in the past 30 years (Exhibit 38).

Exhibit 37: US equities return barely more than government bonds Exhibit 38: US equity risk premium dropped as GDP growth surged
12% -2.0%
10% 10% -1.0%
Atlanta Fed GDPNow
8% Q4 GDP growth 0.0%
8%
6% 1.0%
6% 4% 2.0%
2% 3.0%
4%
0% 4.0%

2% -2% 5.0%
-4% 6.0%
0% 1995 1999 2003 2007 2011 2015 2019 2023
1995 1999 2003 2007 2011 2015 2019 2023 US ERP (earnings yield - 10Y Treasury yield)
US 10-year yield US earnings yield (based on 12M fwd EPS) US GDP qoq growth ann., 4q MA, inverted (rhs)
Source: Refinitiv, Bank J. Safra Sarasin, 07.11.2023 Source: Refinitiv, Bank J. Safra Sarasin, 07.11.2023

A slowing cycle requires a higher equity risk This is not sustainable, in our view. The US economy is unlikely to keep on printing GDP
premium growth rates of 3% to 4% in the coming quarters, rather than slowing to long-term average
growth rates and potentially even entering a recession in mid-2024. Looking at the Atlanta
Fed GDP growth tracker, which has been extremely accurate in projecting GDP growth at
a very early stage in Q3, the normalisation in the cycle is already becoming visible. It is
currently indicating that GDP growth should come in at around 2% in Q4, which would
argue for an equity risk premium substantially above current levels.

In a slowdown, the equity risk premium will However, an adjustment in the equity risk premium is unlikely to be driven by lower equity
also be lifted by falling rates markets alone. If growth were to slow, a drop in yields would likely contribute to a normal-
isation in the equity risk premium. As regards the impact on the equity risk premium, a
100bp decline in the 10-year yield is roughly equivalent to a 10% to 15% decline in the
equity index level. Thus, if growth were to slow back to 2.5% on a sustained basis, the
equity risk premium would have to rise to 3% (see Exhibit 38). If yields decline by 150bp
in such a scenario, the US equity market would have to drop by around 10% in order to
bring the equity risk premium and GDP growth back into balance, according to their his-
torical relationship.

US fixed income looks substantially more at- The most obvious conclusion from these observations is a clear preference for fixed in-
tractive than equities come. If US growth were to come down from its currently elevated level, as we expect to
happen in 2024, the repricing potential in fixed income is substantial while the upside for
equities would be very limited.

We prefer sectors which tend to benefit from This has implications for our global sector preferences. We prefer sectors which usually
lower rates, in particular defensive sectors benefit from a repricing in rates and hold up even if the cycle were to slow. These include
with leverage typical defensive sectors such as staples and health care, but also the more levered part
of the defensives universe, such as utilities and residential real estate.

Euro area equities are looking more attrac- With regard to our regional preferences, valuations provide a pretty clear message. Every
tive after the recent underperformance region is more attractively valued than the US on 12-month forward PEs, and most regions
are trading below their 10-year averages (Exhibit 39). This adds to a cyclical picture which
has been substantially weaker in Europe and in Asia over the past year, implying that most
markets apart from the US are priced for the macro weakness they are currently experi-
encing. We have upgraded euro area equities from a least preferred position, given that

16 | Cross-Asset Weekly
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10 November 2023

they are priced for a slowdown and as they may benefit substantially if China manages to
revive its macro cycle. The most recent data at least suggests that a stabilisation is un-
derway. The Chinese credit impulse has been fluctuating around the zero line for the past
few months, which lends some support to the euro area. Typically, euro area PMIs follow
the Chinese credit stimulus with a lag of around 9 months (Exhibit 40). This means, that
even though there’s substantial uncertainty over how the Chinese economy will look l ike
in the future, recent efforts by the government to stabilise growth at 5% should have a
positive short-term impact on growth in the euro area.

Exhibit 39: Most regions’ valuations seem more attractive than US Exhibit 40: Euro area growth should get some support from China
Price-to-earnings ratio 30%
18
20
20%
12
15
10%
6
10 0% 0

5 -10% -6

-20% -12
0
EM

EMU

UK
US

Japan
CH

World

-30% -18
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
current 10-year average China credit impulse EMU PMI composite NO, 6m chg, 9m lag (rhs)
Source: Refinitiv, Bank J. Safra Sarasin, 08.11.2023 Source: Refinitiv, Bank J. Safra Sarasin, 08.11.2023

Swiss equities are one of our key regional Apart from that, we believe the Swiss market should do significantly better in 2024 than
preferences in 2024 it has done in 2023, as rising rates are likely to be much less of a headwind and its defen-
sive features will be a positive. Opposed to that, Japanese equities are likely to reverse
some of the gains they have seen over recent months, which have largely been a result of
the weakness in the yen. An end to the upside in US yields would also mean an end to yen
weakness. Hence, a stronger yen should weigh on Japanese equities relative to the rest
of the world in 2024.

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10 November 2023

Exhibit 41: JSS Forecast overview

Breakdown per Asset Class Stock Index Price Targets

09.11. 2Q24 4Q24 4Q25
Equities Countries / Regions S&P 500 4’347 4’300 4’600 5’000
USA ➔ MSCI UK 2’140 2’050 2’200 2’320
Eurozone ➔ DJ Euro Stoxx 50 4’229 4’200 4’350 4’600
Switzerland  DAX 15’353 15’100 16’400 17’700
United Kingdom  SMI 10’645 10’800 11’300 12’300
Japan  MSCI Japan 1’430 1’380 1’470 1’550
Emerging Markets ➔ MSCI EM 956 960 1’015 1’090
China ➔ MSCI China 58 60 62 67

Key Policy Rates in %

Equity Sectors
➔ 09.11. 2Q24 4Q24 4Q25
Energy
Materials  US Fed Funds 5.50 5.50 4.50 3.50
Industrials  EUR Depo Rate 4.00 4.00 3.25 2.50
➔ SNB Target Rate 1.75 1.75 1.25 1.00
Consumer Discretionary
 BoE Base Rate 5.25 5.25 4.25 3.25
Consumer Staples
 BOJ Policy Balance Rate -0.10 0.00 0.30 0.60
Health Care
Banks ➔ Bond Yields (10yr Benchmark)
Insurance ➔ 09.11. 2Q24 4Q24 4Q25
Information Technology ➔ USA 4.65 4.00 3.75 4.00
Communication Services ➔ Germany 2.62 2.50 2.30 2.50
Real Estate  Switzerland 1.11 1.20 1.20 1.20
Utilities  United Kingdom 4.36 4.30 4.10 3.50
Japan 0.84 1.10 1.10 1.10
Fixed Income Performance
US Treasuries ➔ FX-Forecasts
German Bunds ➔ 09.11. 2Q24 4Q24 4Q25
UK Gilts ➔ EUR-CHF 0.97 0.95 0.93 0.93
Swiss Eidgenossen ➔ EUR-USD 1.07 1.08 1.10 1.12
IG Credit ➔ EUR-GBP 0.88 0.89 0.90 0.90
HY Credit  GBP-USD 1.22 1.22 1.22 1.24
EM USD Government Bonds  USD-JPY 151 140 130 125
USD-CHF 0.90 0.88 0.85 0.83
USD-CNY 7.29 7.20 7.10 7.05
 ➔ 
Gold, USD per ounce 1’960 1’990 2’050 2’100
Overweight Neutral Underweight
Macro Forecasts
Asset class views (overweight, neutral, un- 2023 2024 2025
derweight) express a tactical recommenda- US GDP 2.4 1.0 1.4
tion with a 3-month horizon. Tactical views CPI 4.2 2.8 2.2
might diverge from year-end stock index Euroland GDP 0.3 0.5 1.1
targets, which are based on our long-term CPI 5.5 2.6 2.3
economic and interest rate forecasts. Switzerland GDP 0.7 0.8 1.0
CPI 2.2 2.3 1.9
UK GDP 0.5 0.2 1.0
CPI 7.3 3.1 2.0
Japan GDP 1.9 0.9 0.8
CPI 3.2 2.3 1.8
China GDP 5.2 4.5 4.5
CPI 0.4 1.6 2.4

18 | Cross-Asset Weekly
 Cross-Asset Weekly
10 November 2023

Economic Calendar
Week of 13/11 – 17/11/2023
Consensus
Country Time Item Date Unit Forecast Prev.
Monday, 13.11.2023
JN 00:50 PPI MoM Oct mom 0.00% -0.30%
00:50 PPI YoY Oct yoy 1.00% 2.00%
US 10:30 NY Fed 1-Yr Inflation Expectations Oct % -- 3.67%

Tuesday, 14.11.2023
EU 11:00 ZEW Survey Expectations Nov Index -- -1.10
11:00 GDP SA QoQ 3Q P qoq -- -0.10%
11:00 GDP SA YoY 3Q P yoy -- 0.10%
US 12:00 NFIB Small Business Optimism Oct Index -- 90.80
14:30 CPI Ex Food and Energy MoM Oct mom 0.30% 0.30%
14:30 CPI Ex Food and Energy YoY Oct yoy 4.10% 4.10%

Wednesday, 15.11.2023
UK 08:00 CPI YoY Oct yoy -- 6.70%
08:00 CPI Core YoY Oct yoy -- 6.10%
US 13:00 MBA Mortgage Applications Nov10 wow -- 2.50%
14:30 Retail Sales Control Group Oct mom 0.10% 0.60%
14:30 PPI Ex Food and Energy MoM Oct mom 0.30% 0.30%
14:30 PPI Ex Food and Energy YoY Oct yoy -- 2.70%
14:30 Empire Manufacturing Nov Index -2.10 -4.60

Thursday, 16.11.2023
US 14:30 Initial Jobless Claims Nov11 1'000 -- --
14:30 NY Fed Services Business Act. Nov Index -- -19.10
14:30 Phil. Fed Business Outlook Nov Index -11.50 -9.00
16:00 NAHB Housing Market Index Nov Index 40.00 40.00
17:00 Kansas City Fed Manf. Activity Nov Index -- -8.00

Friday, 17.11.2023
UK 08:00 Retail Sales Ex Auto Fuel MoM Oct mom -- -0.90%
08:00 Retail Sales Ex Auto Fuel YoY Oct yoy -- -1.00%
US 14:30 Building Permits Oct 1'000 1450k 1473k
14:30 Housing Starts Oct 1'000 1350k 1358k
17:00 Kansas City Fed Services Activity Nov P Index -- -1.00
Source: Bloomberg, J. Safra Sarasin as of 09.11.2023

19 | Cross-Asset Weekly
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10 November 2023

Market Performance
Global Markets in Local Currencies
Government Bonds Current value Δ 1W (bp) Δ YTD (bp) TR YTD in %
Swiss Eidgenosse 10 year (%) 1.14 1 -48 4.5
German Bund 10 year (%) 2.69 4 12 1.3
UK Gilt 10 year (%) 4.31 -19 64 -0.4
US Treasury 10 year (%) 4.60 3 73 -2.9
French OAT - Bund, spread (bp) 59 0 4
Italian BTP - Bund, spread (bp) 187 1 -27

Stock Markets Level P/E ratio 1W TR in % TR YTD in %

SMI - Switzerland 10’624 16.4 0.5 2.3
DAX - Germany 15’292 11.2 1.4 10.3
MSCI Italy 914 7.6 0.4 21.3
IBEX - Spain 9’412 9.9 1.6 18.8
DJ Euro Stoxx 50 - Eurozone 4’213 12.0 1.4 15.0
MSCI UK 2’140 10.6 0.3 3.3
S&P 500 - USA 4’347 20.1 0.7 14.8
Nasdaq 100 - USA 15’188 26.9 1.8 39.8
MSCI Emerging Markets 956 13.4 2.8 2.6

Forex - Crossrates Level 3M implied 1W in % YTD in %

volatility
USD-CHF 0.90 6.7 0.4 -2.3
EUR-CHF 0.96 5.1 0.0 -2.6
GBP-CHF 1.10 6.3 -0.8 -1.3
EUR-USD 1.07 6.7 -0.5 -0.3
GBP-USD 1.22 7.5 -1.2 1.2
USD-JPY 151.4 8.7 1.3 15.4
EUR-GBP 0.87 4.8 0.7 -1.4
EUR-SEK 11.65 6.7 -0.3 4.4
EUR-NOK 11.88 8.8 0.2 13.1

Commodities Level 3M realised 1W in % YTD in %

volatility
Bloomberg Commodity Index 102 13.3 -2.1 -9.6
Brent crude oil - USD / barrel 83 32.9 -6.5 1.7
Gold bullion - USD / Troy ounce 1’957 14.2 -1.5 7.3
Source: J. Safra Sarasin, Bloomberg as of 09.11.2023

20 | Cross-Asset Weekly
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The Bahamas: This publication is circulated to private clients of Bank J. Safra Sarasin (Bahamas) Ltd, and is not intended for circulation to
nationals or citizens of The Bahamas or a person deemed ‘resident’ in The Bahamas for the purposes of exchange control by the Central Bank
of The Bahamas.
Dubai International Financial Centre (DIFC): This material is intended to be distributed by Bank J. Safra Sarasin Asset Management (Middle
East) Ltd [“BJSSAM”] in DIFC to professional clients as defined by the Dubai Financial Services Authority (DFSA). BJSSAM is duly authorised
and regulated by DFSA. If you do not understand the contents of this document, you should consult an authorised financial adviser. This material
may also include Funds which are not subject to any form of regulation or approval by the Dubai Financial Services Authority (“DFSA”). The
DFSA has no responsibility for reviewing or verifying any Issuing Document or other documents in connection with these Funds. Accordingly,
the DFSA has not approved the Issuing Document or any other associated documents nor taken any steps to verify the information set out in
the Issuing Document, and has no responsibility for it. The Units to which the Issuing Document relates may be illiquid and/or subject to re-
strictions on their resale. Prospective purchasers should conduct their own due diligence on the Units.
Germany: This marketing publication/information is being distributed in Germany by J. Safra Sarasin (Deutschland) GmbH, Kirchnerstraße 6-
8, 60311 Frankfurt am Main, for information purposes only and does not lodge claim to completeness of product characteristics. Insofar as
information on investment funds is contained in this publication, any product documents are available on request free of charge from J. Safra
Sarasin (Deutschland) GmbH, Kirchnerstraße 6-8, 60311 Frankfurt am Main in English and German language. To the extent that indicative
investment options or portfolio structures are included, the following applies: The indicative investment options or portfolio structures pre-
sented in these documents and the underlying model calculations are based on the information and data provided to us in the context of the
asset advisory discussion, and we have not checked them for accuracy or completeness. The indicative investment option/portfolio structure
described here is thus intended as a guide and does not make any claim to comprehensive suitability but aims to inform you about the general
possibilities that an investment entails. In order to provide you with a final investment recommendation that is tailored to your specific situation,
we need further information, in particular on your investment goals, risk tolerance, experience and knowledge of financial services and products
and your financial situation. This publication is intended to be distributed by J. Safra Sarasin (Deutschland) GmbH, Kirchnerstraße 6-8, 60311
Frankfurt am Main to clients domiciled or having their registered office in Germany and is directed exclusively at institutional clients who intend
to conclude investment business exclusively as entrepreneurs for commercial purposes. This clientele is limited to credit and financial services
institutions, capital management companies and insurance companies, provided that they have the necessary permission for the business
operation and are subject to supervision, as well as medium and large corporations within the meaning of the German Commercial Code (sec-
tion 267 (2) and (3) HGB).
Gibraltar: This marketing document is distributed from Gibraltar by Bank J. Safra Sarasin (Gibraltar) Ltd, First Floor Neptune House, Marina Bay,
Gibraltar to its clients and prospects. Bank J. Safra Sarasin (Gibraltar) Ltd whose Registered Office is 57/63 Line Wall Road, Gibraltar offers
wealth and investment management products and services to its clients and prospects. Incorporated in Gibraltar with registration number
82334. Bank J. Safra Sarasin (Gibraltar) Ltd is authorised and regulated by the Gibraltar Financial Services Commission. Telephone calls may
be recorded. Your personal data will be handled in accordance with our Data and Privacy Statement. Where this publication is provided to you
by Bank J. Safra Sarasin (Gibraltar) Limited: This document is approved as a marketing communication for the purposes of the Financial Ser-
vices Act 2019. Nothing in this document is intended to exclude or restrict any liability that we owe to you under the regulatory system that
applies to us, and in the event of conflict, any contrary indication is overridden. You are reminded to read all relevant documentation before
making any investment, including risk warnings, and to seek any specialist financial or tax advice that you need. You are not permitted to pass
this document on to others, apart from your professional advisers. If you have received it in error please return or destroy it.
Hong Kong: This document is disseminated by Bank J. Safra Sarasin Ltd, Hong Kong Branch in Hong Kong. Bank J. Safra Sarasin Ltd, Hong
Kong Branch is a licensed bank under the Hong Kong Banking Ordinance (Cap. 155 of the laws of Hong Kong) and a registered institution under
the Securities and Futures Ordinance (cap. 571 of the laws of Hong Kong).
Luxemburg: This publication is distributed in Luxembourg by Banque J. Safra Sarasin (Luxembourg) SA (the “Luxembourg Bank”), having its
registered office at 17-21, Boulevard Joseph II, L-1840 Luxembourg, and being subject to the supervision of the Commission de Surveillance

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 Cross-Asset Weekly
10 November 2023

du Secteur financier – CSSF. The Luxembourg Bank merely agrees to make this document available to its clients in Luxembourg and is not the
author of this document. This document shall not be construed as a personal recommendation as regards the financial instruments or products
or the investment strategies mentioned therein, nor shall it be construed as and does not constitute an invitation to enter into a portfolio
management agreement with the Luxembourg Bank or an offer to subscribe for or purchase any of the products or instruments mentioned
therein. The information provided in this document is not intended to provide a basis on which to make an investment decision. Nothing in this
document constitutes an investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appro-
priate for individual circumstances. Each client shall make its own appraisal. The liability of the Luxembourg Bank may not be engaged with
regards to any investment, divestment or retention decision taken by the client on the basis of the information contained in the present docu-
ment. The client shall bear all risks of losses potentially incurred as a result of such decision. In particular, neither the Luxembourg Bank nor
their shareholders or employees shall be liable for the opinions, estimations and strategies contained in this document.
Monaco: In Monaco this document is distributed by Banque J. Safra Sarasin (Monaco) SA, a bank registered in “Principauté de Monaco” and
regulated by the French Autorité de Contrôle Prudentiel et de Résolution (ACPR) and Monegasque Government and Commission de Contrôle
des Activités Financières («CCAF»).
Panama: This publication is distributed, based solely on public information openly available to the general public, by J. Safra Sarasin Asset
Management S.A., Panama, regulated by the Securities Commission of Panama.
Qatar Financial Centre (QFC): This material is intended to be distributed by Bank J. Safra Sarasin (QFC) LLC, Qatar [“BJSSQ”] from QFC to
Business Customers as defined by the Qatar Financial Centre Regulatory Authority (QFCRA) Rules. Bank J. Safra Sarasin (QFC) LLC is authorised
by QFCRA. This material may also include collective investment scheme/s (Fund/s) that are not registered in the QFC or regulated by the
Regulatory Authority. Any issuing document / prospectus for the Fund, and any related documents, have not been reviewed or approved by the
Regulatory Authority. Investors in the Fund may not have the same access to information about the Fund that they would have to information
of a fund registered in the QFC; and recourse against the Fund, and those involved with it, may be limited or difficult and may have to be pursued
in a jurisdiction outside the QFC.
Singapore: This document is disseminated by Bank J. Safra Sarasin Ltd., Singapore Branch in Singapore. Bank J. Safra Sarasin, Singapore
Branch is an exempt financial adviser under the Singapore Financial Advisers Act (Cap. 110), a wholesale bank licensed under the Singapore
Banking Act (Cap. 19) and regulated by the Monetary Authority of Singapore.
United Kingdom: This document is distributed from the UK by Bank J. Safra Sarasin (Gibraltar) Ltd, London Branch, 47 Berkeley Square, London,
W1J 5AU, to its clients, prospects and other contacts. Bank J. Safra Sarasin (Gibraltar) Ltd offers wealth and investment management products
and services to its clients and prospects through Bank J. Safra Sarasin (Gibraltar) Ltd, London Branch. Registered as a foreign company in the
UK number FC027699. Authorised by the Gibraltar Financial Services Commission and subject to limited regulation in the United Kingdom by
the Financial Conduct Authority and the Prudential Regulation Authority. Registration number 466838. Details about the extent of our regula-
tion by the Financial Conduct Authority and Prudential Regulation Authority are available from us on request. Registered office 57 - 63 Line Wall
Road, Gibraltar. Telephone calls may be recorded. Your personal data will be handled in accordance with our Data and Privacy Statement.
Nothing in this document is intended to exclude or restrict any liability that we owe to you under the regulatory system that applies to us, and
in the event of conflict, any contrary indication is overridden. You are reminded to read all relevant documentation relating to any investment,
including risk warnings, and to seek any specialist financial or tax advice that you need. You are not permitted to pass this document on to
others, apart from your professional advisers. If you have received it in error please return or destroy it.
© Copyright Bank J. Safra Sarasin Ltd. All rights reserved.

23 | Cross-Asset Weekly