Cross-Asset Weekly

17 June 2022

Central banks are upping the ante Contacts

Swiss macro: As we warned in this Weekly last Friday, the Swiss National Bank (SNB) has Dr. Karsten Junius, CFA
increased its policy rate by 50bp to -0.25% (we expected a 25bp move though only). It also Chief Economist
indicated that several more rate hikes are likely. Furthermore, the SNB changed its ex- karsten.junius@jsafrasarasin.com
change rate assessment and does not consider the Swiss franc to be highly valued any- +41 58 317 32 79
more. It is confident that its economy can muster higher rates and a stronger Swiss Franc.
Raphael Olszyna-Marzys
US macro: Similarly, the Fed accelerated its pace of monetary tightening with a 75bp hike International Economist
and a new dot plot indicating that policy rates are set to end the year already in restrictive raphael.olszyna-marzys@jsafrasara-
territory. While we don’t doubt the resolve of the FOMC to bring down inflation, its assump- sin.com
tion that it can do so with limited collateral damage remains far too optimistic . A recession +41 58 317 32 69
in 2023 looks more and more likely.
Mali Chivakul
FX: Recent gains in the euro versus the US dollar have been virtually erased by the latest Emerging Markets Economist
surge in rates. Yet we believe the ECB’s hawkish shift continues to support a fundamen- mali.chivakul@jsafrasarasin.com
tally constructive view on the euro although we note that some of the currency’s chal- +41 58 317 33 01
lenges are likely to stay with us going forward.
Wolf von Rotberg
Equities: The US equity market remains severely challenged by the rise in rates over recent Equity Strategist
weeks, which adds to pressure on stock valuations and the real estate market. Given that wolf.vonrotberg@jsafrasarasin.com
equities and real estate account for more than 50% of US household assets, the consumer +41 58 317 30 20
is coming under increasing pressure. Yet consensus earnings for the S&P 500 are still
projecting a 10% rise in 2023. This is not consistent and will likely see severe earnings Alex Rohner
downgrades until the end of the year and into 2023, when we expect the US economy to Fixed Income Strategist
be hit by a recession. Our end-year targets are under review again and we stick to our view alex.rohner@jsafrasarasin.com
that from a tactical point of view downside outweigh upside risks right now. +41 58 317 32 24

This week’s highlights Dr. Claudio Wewel

FX Strategist
Swiss National Bank: Quarterly Meeting 2 claudio.wewel@jsafrasarasin.com
First hike since 2007 and new exchange rate assessment +41 58 317 32 26

US macro 3
Going faster and deeper into restrictive territory

FX markets 5
More constructive on the euro, but challenges remain

US equities 7
No end of difficult market environment in sight

Economic Calendar 10
Week of 20/06 – 24/06/2022

Market Performance 11
Global Markets in Local Currencies

1 | Cross-Asset Weekly
Cross-Asset Weekly
17 June 2022
Dr. Karsten Junius, CFA
Chief Economist
karsten.junius@jsafrasarasin.com
+41 58 317 32 79
The SNB considers a somewhat stronger
Swiss franc to be helpful in bringing inflation
back to target
More rate hikes to come at a magnitude that
depends on the extent of the CHF appreciation
An adjustment in negative rate exemptions is
mainly technical
We agree with the SNB decisions but wonder
about its communication strategy
In the future, the SNB will hold press confer-
ences after all of its quarterly meetings
2 | Cross-Asset Weekly
Swiss National Bank: Quarterly Meeting
First hike since 2007 and new exchange rate assessment
The SNB increased its policy rate by 50bp to -0.25% which is even more than we dared
to forecast. The SNB also indicated that it will need further rate hikes. Also, a stronger
Swiss franc would help to bring inflation back to its target range. Main taining its growth
forecast for 2022 at 2.5%, the SNB seems to be confident that the Swiss economy can
cope with higher interest rates and a stronger exchange rate. By increasing its inflation
forecast from 0.9% to 1.6% for 2024 and to 2.1% for Q1 2025, it is clear that a further
tightening of monetary conditions is needed to bring inflation back to its target range.
Most importantly, the SNB has skipped its previous FX assessment and no longer consid-
ers the Swiss franc to be highly valued. Instead, it stresses that a stronger franc would
help achieve its monetary policy target. It has also announced that it is willing to intervene
in the FX-market in both directions. This means that a further depreciation as we have
seen since the March policy meeting would likely trigger the sale of FX-reserves to stabilize
the franc. However, the SNB also wouldn’t rule out interventions against the franc in order
to guarantee smooth market developments. However, we would consider those to be
much less likely as stronger franc helps the SNB holding down imported inflation. A grad-
ual and smooth appreciation of the Swiss franc would be most helpful for the SNB’s mon-
etary policy and therefore we think it is the most likely path.
Given that the medium term inflation forecast of the SNB is way above its inflation target
corridor of 0%-2%, we can safely assume further tightening of its monetary policy in the
coming quarters. We expect rate hikes by the SNB at its upcoming quarterly meetings and
also would not rule out another 50bp hike. The magnitude of future rate hikes, however,
will depend on the speed and amount of an appreciation of the Swiss franc. We expect it
to reach parity with the euro by September; this could limit the next rate hike to 25bp only.
We continue to forecast the Swiss economy to grow by 2.7% and 1.4% in 2022 and 2023
and the inflation rate to be 2.6% and 2.0% respectively.
The SNB also decided to change the threshold factor used to calculate the exemptions
from of banks’ sight deposits from negative interest rates from 30 to 28. This is a rather
technical adjustment in order to ensure that money market rates are close to the policy
rate.
In our view, today’s decisions by the SNB are fully justified and necessary to bring back
inflation towards its target range. We are still wondering though why the SNB did not pre -
pare markets better and left them with the impression that they would wait for the ECB to
hike its rates first. We note that by not waiting for the ECB, the SNB is reinforcing its infla-
tion fighting credentials and rightly stressing its independence. It signals that it is focusing
on the current economic environment rather than dogmatically on the interest rate differ-
ential or exchange rate versus the euro.
We appreciate that in the future, the SNB will hold press conferences after each of its
quarterly meeting as announced today. This will contribute to a better understanding of
its monetary policy.
Cross-Asset Weekly
17 June 2022
Raphael Olszyna-Marzys
International Economist
raphael.olszyna-marzys@jsafrasarasin.com
+41 58 317 32 69
The Fed funds rate is set to be in restrictive
territory by the end of this year
Inflation has become sticky, which means that
the Fed might need to raise rates even faster
than it has indicated
High food and energy prices mean that head-
line inflation will remain elevated throughout
the year and keep upward pressure on infla-
tion expectations
Exhibit 1: Used car inflation should fall
Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022
3 | Cross-Asset Weekly
US macro
Going faster and deeper into restrictive territory
With inflation reports surprising on the upside last week, the Fed’s 75bp rate hike on
Wednesday didn’t come as a surprise. But the new dot plot also shows a much faster
pace of tightening than previously indicated, with rates set to end the year already in
restrictive territory. While we don’t doubt the resolve of the FOMC to bring down inflation,
its assumption that it can do so with limited collateral damage remains far too optimis-
tic, in our view. A recession in 2023 looks more and more likely: the faster rates rise
and the further they go, the quicker they will eventually have to fall.
The focus of the meeting was unsurprisingly on inflation. As a result, the new Summary of
Economic Projections shows a much more rapid and forceful tightening of policy than pre-
viously indicated, with 175bp of rate increases between now and the rest of the year. Chair
Powell left open the possibility of another 75bp rate hike at the next meeting in July.
What the Fed wants to see before getting a bit more relaxed about the inflation outlook is
a series of reports showing a decline in the month on month inflation ra tes. This probably
means that the risk to the new rate projection for the end of this year (and to our own Fed
funds rate forecasts) is still skewed to the upside. Inflation will take time to come down as
it has become stickier, reflecting elevated commodity prices and a very tight labour mar-
ket. To get inflation lower faster, we would need to see the supply side of the economy
expand faster in order to be closer to balance with strong demand. But this is unlikely to
happen any time soon given a lack of workers in the US, the war in Ukraine, the zero-COVID
strategy in China and the likelihood of repeated lockdowns well into 2023.
As the latest US CPI report shows, goods inflation is struggling to come down, despite
higher inventories and household consumption which is gradually shifting towards ser-
vices. While we still expect it to fall more meaningfully later this year, inflation in the ser-
vices sector, with shelter as its main driver, is unlikely to peak before 2023 (Exhibits 1 -2).
High food and energy prices will also keep headline inflation elevated for longer, maintain-
ing the upward pressure on households’ inflation expectations. Indeed, even if we assume
that these prices remain unchanged at current levels (which for food is highly unlikely),
these two items alone would still contribute about two percentage points to the overall
inflation rate at the end of 2022 (Exhibit 3).
Exhibit 2: But rent inflation has yet to peak Exhibit 3: Food & energy contributions to CPI
Contribution to CPI yoy% assuming prices remain
3.0 unchanged
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
Jan-21 Jul-21 Jan-22 Jul-22 Jan-23
Food Energy
Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022 Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022
Cross-Asset Weekly
17 June 2022

Fed members still believe they can bring
about a ‘soft landing’
The other interesting element of the meeting, and of the new projections, is that the Com-
mittee still believes it can bring down inflation without hurting the economy too much.
True, Fed members have revised down their GDP growth and revised up their unemploy-
ment rate forecasts for the coming years, but these are still quite strong numbers. In short,
the Fed sees a pathway to reduce inflation towards its 2% target and bring about a ‘soft
landing’, although Mr. Powell himself admitted that this pathway is getting narrower.

We don’t think so In our view, going faster and deeper into restrictive territory means that it will be very hard
for the US economy to avoid a recession in 2023. The market is pricing rates to move to
3.6% by the end of the year and to peak just below 4% in the second quarter of next year
(this is also where most Fed members see the Fed funds rate to peak), which would be the
most aggressive tightening path since 1988. And this doesn’t take into account the impact
from Quantitative Tightening (Exhibit 4).

Exhibit 4: This Fed rate hike cycle could be the most aggressive since 1988

Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022

Demand is already coming down rapidly in
some segments of the economy, such as resi-
dential housing
There is growing evidence that tighter policy is already weighing on demand. Mortgage
rates have risen sharply and home sales have dropped. It’s just a matter of time before
this will be reflected in much weaker construction activity (housing starts already fell 14%
in May), and eventually in lower house prices too (Exhibits 5-7). A drop in residential in-
vestment should also lead to weaker demand for durable goods, and lower asset prices
will weigh on consumer and business sentiment, with negative knock-on effects on con-
sumption and hiring. A strong dollar should also hurt firms’ competitiveness and hit their
profit margins.

Exhibit 5: Home sales are coming down Exhibit 6: Construction activity will drop too Exhibit 7: House prices are likely to fall

Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022 Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022 Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022

4 | Cross-Asset Weekly
Cross-Asset Weekly
17 June 2022
Dr. Claudio Wewel
FX Strategist
claudio.wewel@jsafrasarasin.com
+41 58 317 32 26
Renewed sell-off in bond and equity markets
erased recent EUR-USD gains
The ECB’s hawkish shift reduces the policy
gap to the Fed, turning the EUR-USD yield dif-
ferential in favour of the euro. Yet challenges
remain.
Exhibit 1: Latest sell-off pushed euro lower
Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022
Renewed widening of peripheral bond spreads
in the euro area weighs on the currency
5 | Cross-Asset Weekly
FX markets
More constructive on the euro, but challenges remain
Amid the renewed sell-off in bond and equity markets, recent gains in the euro versus
the US dollar have been virtually erased. Yet we believe the ECB’s recent hawkish shift
continues to support a fundamentally constructive view on the euro, while we note that
some of the currency’s challenges are likely to stay with us going forward.
With the ECB’s hawkish shift, we recently turned more constructive on the European com-
mon currency. Yet the renewed sell-off in bond and equity markets has virtually erased the
euro’s previous gains versus the US dollar within a matter of days (Exhibit 1).
The pronounced monetary policy divergence between the ECB and the Fed has long
weighed on the euro. Yet we think that the euro should be close to its trough. The persis-
tence of unusually high inflation readings for the euro area (Exhibit 2) has increased the
pressure on the ECB to act much more decisively than it has envisaged so far. By announc-
ing a 25bp policy rate hike for July and indicating another 50bp hike for September as part
of last week’s monetary policy meeting, the ECB is now clearly perceived as committing to
the fight against inflation, while it stresses that «inflation will remain undesirably elevated
for some time». We now project the ECB to hike at each of its coming six meetings (Exhibit
3). On the back of the ECB’s hawkish shift, the EUR-USD yield differential has turned in
favour of the euro (Exhibit 4), which substantiates our constructive view on the currency.
Exhibit 2: Euro area inflation has risen sharply Exhibit 3: ECB policy rate to rise faster
Bank J. Safra Sarasin policy rate forecasts, %
4
-1
2018 2019 2020 2021 2022 2023
Forecast US Fed Funds
ECB deposit rate UK base rate
Japan O/N
Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022 Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022
First, the ECB’s special conditions for its long-term refinancing operation (TLTRO III) are
expiring. As lenders from the European periphery benefited from this heavily, this contrib-
uted to the recent spread widening. After this week’s ad hoc meeting, the ECB Governing
Council tasked its staff to explore the set-up of a possible new anti-fragmentation instru-
ment. Preventing fragmentation risks is crucial for an orderly transmission of the ECB’s
monetary policies and hence equally important for the euro’s exchange rate versus the US
dollar (Exhibit 5). Consequently, markets will continue to monitor developments on this
front closely.
Cross-Asset Weekly
17 June 2022

Exhibit 4: Real yield differentials have turned in favour of the euro… Exhibit 5: …while fragmentation risk is weighing on the euro
1.25 0

1.20 -50

1.15 -100

1.10 -150

1.05 -200

1.00 -250
Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22
EURUSD EUR-USD real yield differential, bps

Source: Bloomberg, Bank J. Safra Sarasin, 16.06.2022 Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022

Euro remains exposed to the global cycle and
to Chinese weakness
Second, we emphasise that the euro remains exposed to the global cycle, which lends the
US dollar a relative edge (Exhibit 6). So far, PMIs have continued to print at relatively ro-
bust levels. Going forward, global macro momentum is yet poised to drop further. Pent-up
demand should continue to diminish while the increase in living costs will likely be a
squeeze on consumption. Moreover, China should also add to the global slowdown given
that it continues to adhere strictly to its zero-COVID approach (Exhibit 7). The delayed re-
opening in Beijing and Shanghai continues to depress economic activity, which will remain
a challenge for supply chains in the manufacturing-intensive euro area economy.

Exhibit 6: USD has a relative edge when the global economy is slowing Exhibit 7: Contrary to the rest of the world, China has tightened COVID rules
EUR-USD, 6m % changes, reversed, monthly averages
-20 2000 − present
-15 current
USD smile, fitted
-10
-5
0
5
10
15
20
-20 -15 -10 -5 0 5 10 15 20 25
Global PMI manufacturing, 6m changes
Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022 Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022

For the euro area, a cut-off from Russian gas
remains a distinct possibility
Lastly, we stress that with the Russian army having gained more Ukrainian territory as of
late, the conflict between Russia and the West is likely to drag on for a prolonged period
of time. For the euro area, this means that a broader cut-off from Russian gas in Q4 re-
mains a distinct possibility. As it would likely push the euro area into recession, a cut-off
from Russian gas remains another – perhaps underestimated – downside risk for the
European currency.

6 | Cross-Asset Weekly
Cross-Asset Weekly
17 June 2022

US equities
No end of difficult market environment in sight
Wolf von Rotberg The equity market remains severely challenged with the rise in rates over recent weeks
Equity Strategist adding to the pressure on valuations and increasingly complicating the eco nomic situa-
wolf.vonrotberg@jsafrasarasin.com tion over the coming months. For example the housing market: with 30-year mortgage
+41 58 317 30 20 rates in the US back at 6%, housing affordability is as bad as it last was in 2007. Given
that equities and real estate account for more than 50% of US household asse ts, the
consumer is coming under increasing pressure. Yet consensus earnings for the S&P 500
are still projecting a 10% rise in earnings in 2023. This is not consistent and will likely
see severe earnings downgrades until the end of the year and into 2023, when we expect
the US economy to be hit by a recession. Our end-year target are once again under review
and we stick to our view that from a tactical point of view downside risks outweigh up-
side risks right now.

Challenges for the equity market are set to
grow as the fallout from higher rates will
weigh on the cycle
The equity market is set to remain severely challenged over the coming months in our
view, yet not offering an entry point to benefit from potential longer-term upside. The rise
in yields, which has come in response to surging inflation, has put massive pressure on
equity market valuations since the beginning of the year and almost fully reversed the re -
rating equities had gone through after the pandemic started (Exhibit 1). Real rates have
risen by an unprecedented 200bps from their troughs last year, pushing the 12-month
forward price-to-earnings ratio on US equities back down below 16x, after hitting 23x in
the first quarter of 2021. Real rates have now almost closed the gap which had opened
up to the market’s pricing for future Fed hikes (Exhibit 2).

Exhibit 1: Equity valuations suffered from the rise in real rates Exhibit 2: Real rates have mostly caught up with Fed pricing
-160 % %
24 S&P500 12m fwd PE 6.5
3.5
US TIPS yield, bps, inverted (rhs) -120
5.5
2.8
22
-80 4.5
2.1
20 -40 1.4 3.5

0 0.7 2.5
18
0.0 1.5
40
-0.7 0.5
16 80
-1.4 -0.5
120 2008 2010 2012 2014 2016 2018 2020 2022
14
2017 2018 2019 2020 2021 2022 US TIPS yield 10Y (lhs) US 3Y Fed Funds future (rhs)

Source: Refinitiv, Bank J. Safra Sarasin, 15.06.2022 Source: Refinitiv, Bank J. Safra Sarasin, 15.06.2022

Funding conditions for homebuyers are as bad
as they last were in 2007, a sharp deteriora-
tion from one year ago
While the upside pressure on rates may potentially be lower going forward (reducing down-
side pressure on valuations), the equity market is unlikely to stabilise quickly. A bigger
challenge lies ahead. The fallout from the unprecedented rise in rates on the economy is
yet neither reflected in the macro data nor in consensus earnings expectations. The chal-
lenges for the economy over the coming 12 months are formidable with inflation outpacing
nominal wage growth and asset prices coming under pressure across the board. Housing
affordability has collapsed as a result of the rise in mortgage rates. For the first time since
2007, at current mortgage rates, the median household would have to pay more than 25%
of its monthly income on a median house (Exhibit 3). The monthly mortgage instalment
has more than doubled for a median house buyer since the end of last year, to almost USD
1,900 from around USD 930 in December. If rates remain at current levels, a decline in

7 | Cross-Asset Weekly
Cross-Asset Weekly
17 June 2022

house prices seems quite likely over the coming 12 months (Exhibit 4). Why does it mat-
ter? Housing and equity market holdings account for roughly a quarter each of US house-
holds’ gross assets. With more than 50% of household assets under pressure, deteriorat-
ing balance sheets, consumption is likely to suffer in the months ahead.

Exhibit 3: Mortgage cost relative to income at 2007 levels Exhibit 4: US house prices are set to fall in 2023
Share of monthly income a median US household has to 20% 2.4
28% pay for a mortgage on a median (existing) home
26% 15% 3.0

24% 10% 3.6

22%
5% 4.2
20%
0% 4.8
18%
16% -5% 5.4
14% -10% 6.0
12%
-15%
10% 2008 2010 2012 2014 2016 2018 2020 2022
8% US house prices (Case-Shiller), yoy, 1-year lag
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 US 30-year mortgage rate, %, inv. (rhs)

Source: Refinitiv, Bank J. Safra Sarasin, 15.06.2022 Source: Refinitiv, Bank J. Safra Sarasin, 15.06.2022

We expect a US recession in 2023, which
leaves consensus earnings expectations far
too high at current levels
As a result of these pressures, we expect the US economy to fall into recession over the
coming 18 months, a development which is yet not baked into consensus earnings num-
bers. These are still well above long-term trend levels (as is US goods consumption, Exhibit
5), projecting a 10% increase in US EPS in 2023, while the dividing line between earnings
growth and a contraction is typically around 1% GDP growth year-over-year (Exhibit 6). As
US GDP growth is set to converge towards 1% yoy by the end of 2022, the economic tra-
jectory we have in mind should lead to a significant slowdown in EPS growth over the com-
ing months.

Exhibit 5: Earnings have followed consumption above trend Exhibit 6: Our GDP trajectory suggests falling EPS growth
7% US GDP growth, yoy 50%
S&P500 earnings 6000 BJSS GDP forecast
250
S&P500 earnings, trend 6% S&P 500 12m fwd earnings, yoy (rhs) 40%
220 US goods consumption, nominal (rhs) 5%
30%
US goods consumption, trend (rhs) 4%
5000 20%
190 3%
2% 10%
160 1% 0%
0%
130 4000 -10%
-1%
-20%
100 -2%
-3% -30%
70 3000 -4% -40%
2010 2012 2014 2016 2018 2020 2022 2006 2008 2010 2012 2014 2016 2018 2020 2022

Source: Refinitiv, Bank J. Safra Sarasin, 15.06.2022 Source: Refinitiv, Bank J. Safra Sarasin, 15.06.2022

Earnings growth is set to stall, while consen-
sus still expects 10% growth in 2023
Adding assumptions on the oil price and the US dollar, which are secondary drivers of S&P
500 earnings after GDP growth (proxied by the US ISM), our model confirms that view,
predicting growth in 12-month forward consensus earnings to stall by the end of this year
(Exhibit 7). With year-over-year earnings growth approaching zero, earnings levels should
start declining by the second half of this year, converging towards USD 230 or slightly
below, which would be around 4% below current levels (Exhibit 8). Against this backdrop,
the consensus number for 2023 of USD 247 appears far too optimistic and should see
significant downgrades in the weeks and months to come.

8 | Cross-Asset Weekly
Cross-Asset Weekly
17 June 2022

Exhibit 7: Our earnings model suggests slowing earnings growth Exhibit 8: Consensus earnings should come down in the second half
50% 260
40%
240
30%
20% 220

10% 200
0%
180
-10%
-20% 160

-30% 140
-40%
120
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
2018 2019 2020 2021 2022
S&P 500, 12m fwd EPS, yoy Fitted (US ISM, USD, Brent) S&P 500, 12-month forward EPS Implied by macro outlook

Source: Refinitiv, Bank J. Safra Sarasin, 15.06.2022 Source: Refinitiv, Bank J. Safra Sarasin, 15.06.2022

Our end-year target seems optimistic against
this backdrop. Our tactical view remains to be
cautious and defensively positioned.
Where does this leave us with regards to the end-year target? Our 2022 target of 4300 is
based on the assumption that real rates end the year at -10bps, which the market has
been clearly moving away from over recent weeks. Furthermore, we assumed EPS (12 -
month forward consensus) to clock in at ~USD 230 by end-2022. Considering the eco-
nomic risks which come on the heels of the stronger rise in rates, this target is coming
under pressure from both ends. Purely arithmetical, if real rates were to stay at current
levels, earnings would have to rise by 15% over the coming 6 months. Similarly, stable
earnings would require real rates to drop to 0. This would effectively mean that the market
needs to shed around 70bps of Fed hikes priced right now. Given that it is unlikely that
inflation magically comes down in an environment in which earnings growth can h old up,
this scenario also appears a tail-risk at best. Risks appear to be clearly tilted to the down-
side. We are in the process of reviewing our target (once again) and stick to our long-held
tactical view that the market environment is likely to remain challenging for the time being.

Exhibit 9: Current real rates and consensus earnings are suggesting an S&P500 level of 3750
S&P 500 2022 US GDP growth (yoy)
PE
end-2022 -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
2023 EPS 211 215 219 224 228 232 237 241 245 250 254 258
US real -10 18.6 3915 3995 4075 4155 4235 4315 4396 4476 4556 4636 4716 4796
rate 0 18.2 3840 3919 3997 4076 4155 4233 4312 4391 4469 4548 4626 4705
(bps) 10 17.9 3766 3843 3920 3997 4074 4151 4228 4305 4383 4460 4537 4614
20 17.5 3691 3767 3842 3918 3994 4069 4145 4220 4296 4371 4447 4523
30 17.2 3617 3691 3765 3839 3913 3987 4061 4135 4209 4283 4357 4431
40 16.8 3542 3615 3687 3760 3832 3905 3977 4050 4123 4195 4268 4340
50 16.4 3468 3539 3610 3681 3752 3823 3894 3965 4036 4107 4178 4249
60 16.1 3393 3463 3532 3602 3671 3741 3810 3880 3949 4019 4088 4158
70 15.7 3319 3387 3455 3523 3591 3659 3727 3795 3863 3931 3998 4066
80 15.4 3244 3311 3377 3444 3510 3577 3643 3709 3776 3842 3909 3975
90 15.0 3170 3235 3300 3365 3430 3495 3559 3624 3689 3754 3819 3884
Source: Macrobond, Bank J. Safra Sarasin, 16.06.2022

9 | Cross-Asset Weekly
Cross-Asset Weekly
17 June 2022

Economic Calendar
Week of 20/06 – 24/06/2022
Consensus
Country Time Item Date Unit Forecast Prev.
Monday, 20.06.2022
GE 8:00 PPI MoM May mom -- 2.8%
8:00 PPI YoY May yoy -- 33.5%

Tuesday, 21.06.2022
UK 12:00 CBI Trends Total Orders Jun Index 20.0 26.0
US 14:30 Chicago National Activity Index May Index -- 0.5
16:00 Existing Home Sales MoM May mom -3.6% -2.4%

Wednesday, 22.06.2022
UK 08:00 CPI MoM May mom -- 2.50%
08:00 CPI YoY May yoy 9.20% 9.00%
US 13:00 Mortgage Applications May wow -- 6.20%

Thursday, 23.06.2022
FR 09:15 P Global France Mfg PMI June P Index -- 54.60
GE 09:30 Global Germany Mfg PMI June P Index -- 54.80
EU 10:00 Global Eurozone Mfg PMI June P Index -- 54.60
UK 10:30 Global UK Mfg PMI June P Index -- 54.60
US 14:30 Initial Jobless Claims June11 1'000 -- 229k
15:46 Global US Mfg PMI June P Index -- 58.00
17:00 Kansas City Fed Mfg Index June Index -- 23.00

Friday, 24.06.2022
EU 10:00 Ifo Business Expectations Jun Index -- 86.9
US 16:00 New Home Sales May mom 5.8% -16.6%
Source: Bloomberg, J. Safra Sarasin as of 16.06.2022

10 | Cross-Asset Weekly
Cross-Asset Weekly
17 June 2022

Market Performance
Global Markets in Local Currencies
Government Bonds Current value Δ 1W Δ YTD TR YTD in %
Swiss Eidgenosse 10 year (%) 1.44 30 157 -10.7
German Bund 10 year (%) 1.69 17 186 -14.0
UK Gilt 10 year (%) 2.52 27 154 -10.3
US Treasury 10 year (%) 3.24 9 173 -12.9
French OAT - Bund, spread (bp) 54 -4 17
Italian BTP - Bund, spread (bp) 206 -19 71

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

SMI - Switzerland 10’475 15.1 -7.5 -16.4
DAX - Germany 13’038 10.8 -8.2 -17.9
MSCI Italy 688 8.2 -8.1 -19.8
IBEX - Spain 8’078 11.1 -7.3 -5.7
DJ Euro Stoxx 50 - Eurozone 3’428 10.9 -8.0 -18.1
MSCI UK 2’033 9.7 -5.5 -0.3
S&P 500 - USA 3’667 16.0 -8.7 -22.5
Nasdaq 100 - USA 11’128 19.9 -9.3 -31.6
MSCI Emerging Markets 1’008 11.1 -5.4 -17.3

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

volatility
USD-CHF 0.97 10.1 -1.9 6.1
EUR-CHF 1.02 7.6 -2.0 -1.5
GBP-CHF 1.19 10.3 -2.2 -3.5
EUR-USD 1.05 9.6 -0.1 -7.2
GBP-USD 1.23 11.3 -0.3 -9.0
USD-JPY 134.1 12.4 -0.3 16.5
EUR-GBP 0.86 8.6 0.2 2.0
EUR-SEK 10.69 7.4 1.4 4.4
EUR-NOK 10.48 10.7 2.7 5.0

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

volatility
Bloomberg Commodity Index 130 23.4 -4.4 30.9
Brent crude oil - USD / barrel 122 31.4 -2.8 55.5
Gold bullion - USD / Troy ounce 1’847 15.6 -0.1 1.8
Source: J. Safra Sarasin, Bloomberg as of 16.06.2022

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Cross-Asset Weekly
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liness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the fore-
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Luxemburg: This publication is distributed in Luxembourg by Banque J. Safra Sarasin (Luxembourg) SA (the “Luxembourg Bank”), having its
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14 | Cross-Asset Weekly