• Hopes of a soft landing for the economy, spurred by the Federal Reserve, buoyed markets in January. However, in March, problems began to emerge in the banking system. While these problems could slow the rise in interest rates, "friendly" monetary policy is less likely to support markets if financial conditions tighten.
• Economic growth appears to face greater risks in the US. On the other hand, Europe shows some resilience thanks to low energy prices and favorable fiscal factors. China's reopening is on schedule and could still benefit from pent-up demand and excess savings.
• The challenge for the market will be to balance the hope of a "soft landing" without much impact on corporate profits, employment or credit, while at the same time expecting inflation to come down quickly.while at the same time expecting inflation to come down quickly.
• With growth weak and risks tilted to the downside, our main recommendation is to give more weight to fixed income.
• On the credit side, we maintain a neutral position and we prefer grade investments over high-yielding ones.
• Interest rates on the short-term sovereign curve are attractive compared to history. We remain neutral on duration (around 4 years).
• To have a positive view on stocks at this stage, an optimistic set of assumptions about growth, rates, China and politics is needed. Otherwise, stocks must compete with attractive risk-free rates (near 5% in the short term).
• For this reason, we are moderately underweight equities, due to higher growth risks and less attractive valuations, especially in the case of the US. We recommend giving more weight to markets outside the US.
• We expect the dollar to weaken furtheras rate differentials become less favorable due to a further decline in U.S. rates.
• In 2022, commodity markets were dominated by the dollar, but in 2023, lack of investment will be the key factor. Although most commodities have a bullish outlook due to the reopening of the Chinese economy, recession fears in the U.S. could take their toll in the coming months.
• Regarding private markets, we expect the adjustment in valuations to continue this quarter (negative). Financing conditions remain tight and could tighten further. Valuations are tightening, dry powder remains at historically high levels and Deal Flow remains low.
• However, on the private equity side, we see opportunities in secondary markets, given the attractive discounts that can be found in the market today.
• In private debt, Direct lending remains the most sought-after private debt sub-strategy and Distressed Debt can benefit from the current stage of the economic cycle. and Distressed Debt can benefit from the current stage of the economic cycle.
• Finally, in Renta Inmobiliaria we see an important gap between the private and public worlds, where the public side has a greater upside.

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Humberto Mora

Assistant Investment Manager Finance and Business Finance and Business Brokerage Firm