2022 has proven a challenging year for investors so far. A look at the performance of the major asset classes reveals where the problem lies: prices have tumbled across the board – whether bonds, equities or real estate. Even the price of supposedly secure gold is lower than a few months ago. As a result, almost all investors are experiencing similarly poor performance: even those who opted for a restrained investment strategy with a low equity component lost almost as much as investors with greater risk appetite.
This development is due to the unexpectedly strong rise in inflation. The triggers for all this are well documented: the Ukraine conflict, higher commodity prices and supply bottlenecks. Inflation has dragged capital market interest rates up in its wake. Whereas ten-year Swiss government bonds were still generating negative yield on maturity a year ago, the return now stands at almost 1 percent. However, rising interest rates inevitably lead to lower bond prices and are toxic for the valuation of equities and real estate.