--- title: H2/2023 - Climbing the wall of worry description: "Risk assets are off to a very decent start of the year. While some key hurdles are now behind us, we believe that volatility could pick-up in the second half of the year as central banks\nmight have to maintain restrictive financial conditions while economic growth is slowing down." image: https://blog.syzgroup.com/hubfs/Syz-MarketOutlook-H2%202023%20(2).jpg --- [![Syz Private banking](https://blog.syzgroup.com/hs-fs/hubfs/Logo.png?width=140&name=Logo.png "Syz Private banking")](https://www.syzgroup.com/fr) ## **Thinking** out loud [Subscribe](https://25733253.hs-sites-eu1.com/newsletter-signup?hsLang=en) [![Contact Us](https://hubspot-no-cache-eu1-prod.s3.amazonaws.com/cta/default/25733253/3d762f49-4e71-4f99-97b1-bf6781ef3da2.png)](https://hubspot-cta-redirect-eu1-prod.s3.amazonaws.com/cta/redirect/25733253/3d762f49-4e71-4f99-97b1-bf6781ef3da2) - [OUR SERVICES](https://www.syzgroup.com/en/private-banking) - [ABOUT SYZ](https://www.syzgroup.com/en/about/welcome-to-syz) - [CAREERS](https://www.syzgroup.com/en/careers) - [PRESS](https://www.syzgroup.com/en/news) - [Blog Homepage](https://blog.syzgroup.com) - [Slow Food for Thought](https://blog.syzgroup.com/slow-food-for-thought) - [Focus](https://blog.syzgroup.com/slow-food-for-thoughts/tag/focus) - [Asset allocations Insights](https://blog.syzgroup.com/slow-food-for-thoughts/tag/asset-allocation-insights) - [Market Outlook](https://blog.syzgroup.com/slow-food-for-thoughts/tag/market-outlook) - [Swiss Perspectives](https://blog.syzgroup.com/slow-food-for-thoughts/tag/swiss-perspectives) - [Syz the moment](https://blog.syzgroup.com/syz-the-moment) - [Crypto corner](https://blog.syzgroup.com/crypto-corner) - [Syz AI Insights](https://blog.syzgroup.com/syz-ai-insights) - [Fast Food for Thought](https://blog.syzgroup.com/fast-food-for-thought) - [The week in seven charts](https://blog.syzgroup.com/fast-food-for-thoughts/tag/the-week-in-seven-charts) - [Flash](https://blog.syzgroup.com/fast-food-for-thoughts/tag/flash) - [Fixed Income Weekly](https://blog.syzgroup.com/fast-food-for-thought/tag/weekly-fixed-income) - [Equity Weekly](https://blog.syzgroup.com/fast-food-for-thought/tag/weekly-equities) - [Global markets outlook](https://blog.syzgroup.com/fast-food-for-thoughts/tag/global-markets-outlook) - [CONTACT](https://www.syzgroup.com/en/contact-us/form) - [ENGLISH](https://www.syzgroup.com/) - [FRANÇAIS](https://www.syzgroup.com/fr) - [Slow Food for Thought](https://blog.syzgroup.com/slow-food-for-thought) - [Focus](https://blog.syzgroup.com/slow-food-for-thoughts/tag/focus) - [Asset allocations Insights](https://blog.syzgroup.com/slow-food-for-thoughts/tag/asset-allocation-insights) - [Market Outlook](https://blog.syzgroup.com/slow-food-for-thoughts/tag/market-outlook) - [Swiss Perspectives](https://blog.syzgroup.com/slow-food-for-thoughts/tag/swiss-perspectives) - [Fast Food for Thought](https://blog.syzgroup.com/fast-food-for-thought) - [Flash](https://blog.syzgroup.com/fast-food-for-thoughts/tag/flash) - [Weekly Fixed Income](https://blog.syzgroup.com/fast-food-for-thought/tag/weekly-fixed-income) - [The week in seven charts](https://blog.syzgroup.com/slow-food-for-thoughts/tag/the-week-in-seven-charts) - [Global markets outlook](https://blog.syzgroup.com/fast-food-for-thoughts/tag/global-markets-outlook) - [Weekly Equities](https://blog.syzgroup.com/fast-food-for-thought/tag/weekly-equities) - [Syz the moment](https://blog.syzgroup.com/syz-the-moment) - [Crypto corner](https://blog.syzgroup.com/crypto-corner) - [Syz AI Insights](https://blog.syzgroup.com/syz-ai-insights) - [Our Services](https://www.syzgroup.com/en/private-banking) - [About Syz](https://www.syzgroup.com/en/about/welcome-to-syz) - [Careers](https://www.syzgroup.com/en/careers) - [Press](https://www.syzgroup.com/en/news) - [Contact](https://www.syzgroup.com/en/contact-us/form) - [English](https://www.syzgroup.com/) - [Français](https://www.syzgroup.com/fr) ## **Sign-up** for our newsletter This website uses cookies to enhance user navigation and to collect statistical data. 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If you made a mistake, please change here USA Country Switzerland Canada: Other than Ontario, Quebec, Alberta Canada: Ontario, Quebec or Alberta USA Other country Language Language English French German Italian I confirm Legal information This marketing document has been issued by Bank Syz Ltd. It is not intended for distribution to, publication, provision or use by individuals or legal entities that are citizens of or reside in a state, country or jurisdiction in which applicable laws and regulations prohibit its distribution, publication, provision or use. It is not directed to any person or entity to whom it would be illegal to send such marketing material. This document is intended for informational purposes only and should not be construed as an offer, solicitation or recommendation for the subscription, purchase, sale or safekeeping of any security or financial instrument or for the engagement in any other transaction, as the provision of any investment advice or service, or as a contractual document. Nothing in this document constitutes an investment, legal, tax or accounting advice or a representation that any investment or strategy is suitable or appropriate for an investor's particular and individual circumstances, nor does it constitute a personalized investment advice for any investor. This document reflects the information, opinions and comments of Bank Syz Ltd. as of the date of its publication, which are subject to change without notice. The opinions and comments of the authors in this document reflect their current views and may not coincide with those of other Syz Group entities or third parties, which may have reached different conclusions. The market valuations, terms and calculations contained herein are estimates only. The information provided comes from sources deemed reliable, but Bank Syz Ltd. does not guarantee its completeness, accuracy, reliability and actuality. Past performance gives no indication of nor guarantees current or future results. Bank Syz Ltd. accepts no liability for any loss arising from the use of this document. [Market Outlook](https://blog.syzgroup.com/slow-food-for-thought/tag/market-outlook) ### H2/2023 - Climbing the wall of worry Risk assets are off to a very decent start of the year. While some key hurdles are now behind us, we believe that volatility could pick-up in the second half of the year as central banks might have to maintain restrictive financial conditions while economic growth is slowing down. [![Charles-Henry Monchau, CFA, CMT, CAIA](https://blog.syzgroup.com/hubfs/charles-2.jpg)](https://blog.syzgroup.com/slow-food-for-thought/author/charles-henry-monchau) [**Charles-Henry Monchau, CFA, CMT, CAIA**](https://blog.syzgroup.com/slow-food-for-thought/author/charles-henry-monchau) Chief Investment Officer **Friday, 06/30/2023** | - ![Pdf](https://blog.syzgroup.com/hubfs/pdf%20(1).png) - - - -   # Are the skies finally clearing? **The first half of the year is over. After a dreadful 2022, equity markets have been doing well. By surpassing a 20% gain from the October low, the S&P 500 is technically in a new bull market.**    --- The gains have been mainly driven by a limited number of mega-caps tech stocks driven by the Artificial Intelligence boom.  We note however that the rally has been broadening lately to other areas of the market, for example, value or small caps, which is a positive. Japan continues to perform well, while China disappoints.  Fixed Income have been generating decent gains as well, while commodities are by far the worst performing asset class in the first half of this year.  After last year’s crypto-crash, Bitcoin is coming back with a vengeance. So far, it’s the best performing asset year-to-date with a gain of more than 50%.  **Indeed, markets have been climbing the wall of worry.** The US debt ceiling drama is now behind us, the US banking crisis that we have been observing in slow motion seems to be stabilizing, inflation continues to cool down, G7 economies are likely to avoid a deep recession and last but not least, earnings have been surprisingly resilient as analysts expect margin improvement stemming from AI-driven productivity enhancements. ## **Does that mean it’s time to celebrate and increase exposure to risk assets in portfolios?** **Let’s keep in mind a few remaining hurdles.** First, on the macro side, we might very well enter the stage where the most aggressive rate hike cycle since the 80s start to impact economic growth.  Furthermore, central banks seem reluctant to pause or cut rates, as inflation remains well above target.  Resulting in a situation where the Fed, and other central banks, are not our friends when the weakest parts of the economy start to tank. This is not a macro-economic and liquidity context we are used to.  Another hurdle is the fact that earnings growth expectations look too optimistic at a time when valuations are expensive. This combination means that there is little room for disappointment. Especially if we take into account the fact that markets seem very complacent at this stage.  The VIX, or fear index as it’s commonly known, is below 14, investor sentiment surveys show a high level of optimism and money flows into tech stocks have been very aggressive recently.  **So be cautious**, any unexpected macroeconomic development or monetary policy decision could trigger a volatility spike.  **To conclude, how should investors position their portfolios for the second half of this year? We believe that there are 3 golden rules to follow during these uncertain times.**  **One, stay invested.** Market timing is a losing game. Given the high level of inflation, there is no alternative than to invest in risk assets to protect purchasing power.  **Two, “Go for quality”.** Now is the time to invest in companies with strong management, a robust balance sheet, high profitability and wide economic moat. This applies to both equities and credit.  **Three, be opportunistic.** We need to use volatility at our advantage. Any market pullback can be used as an opportunity to buy quality stocks with a safety margin  And don’t forget to look for opportunities on a broad basis. While some tech stocks are richly valued, other parts of the market look attractive. Japan, Europe and some emerging markets are not expensive. The same applies to value style and small caps in the US.  **We wish you all the best for the second half of this year and we look forward to continuing the conversation.** #### Disclaimer This marketing document has been issued by Bank Syz Ltd. It is not intended for distribution to, publication, provision or use by individuals or legal entities that are citizens of or reside in a state, country or jurisdiction in which applicable laws and regulations prohibit its distribution, publication, provision or use. It is not directed to any person or entity to whom it would be illegal to send such marketing material. This document is intended for informational purposes only and should not be construed as an offer, solicitation or recommendation for the subscription, purchase, sale or safekeeping of any security or financial instrument or for the engagement in any other transaction, as the provision of any investment advice or service, or as a contractual document. Nothing in this document constitutes an investment, legal, tax or accounting advice or a representation that any investment or strategy is suitable or appropriate for an investor's particular and individual circumstances, nor does it constitute a personalized investment advice for any investor. This document reflects the information, opinions and comments of Bank Syz Ltd. as of the date of its publication, which are subject to change without notice. The opinions and comments of the authors in this document reflect their current views and may not coincide with those of other Syz Group entities or third parties, which may have reached different conclusions. The market valuations, terms and calculations contained herein are estimates only. The information provided comes from sources deemed reliable, but Bank Syz Ltd. does not guarantee its completeness, accuracy, reliability and actuality. Past performance gives no indication of nor guarantees current or future results. Bank Syz Ltd. accepts no liability for any loss arising from the use of this document. 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