Credit Suisse Investment Outlook 2023

Investment Outlook 2023 A fundamental reset Important information This report represents the views of Credit Suisse (CS) Investment Solutions & Sustainability and has not been prepared in accordance with the legal requirements designed to promote the independence of investment research. It is not a product of the CS Research Department even if it references published research recommendations. CS has policies in place to manage conflicts of interest including policies relating to dealing ahead of the dissemination of investment research. These policies do not apply to the views of Investment Solutions & Sustainability contained in this report. Please find further important information at the end of this material. Singapore: For accredited investors only. Hong Kong: For professional investors only. Australia: For wholesale clients only.

Investment Outlook 2023 A fundamental reset Find out more

4 | 5 06 Editorial 08 H eadlines in 2022 10 Core views 2023 13 Global economy 14 A fundamental reset 20 Regional outlook 22 Investment roadmap 2023 25 Main asset classes 28 Fixed income 32 Equities 40 Technical corner 42 Currencies 45 Real estate 46 Hedge funds 48 Private markets 50 Commodities 52 Diversify your risks 54 The energy system 59 Forecasts 60 2 023 in numbers 62 Disclaimer 66 Imprint

Editorial 6 | 7 A time for prudence Reset is the new reality Michael Strobaek Nannette Hechler-Fayd’herbe Philipp Lisibach Global Chief Investment Officer Head of Global Economics & Research Head of Global Investment Strategy Credit Suisse Credit Suisse Credit Suisse If 2022 confronted investors with stiff headwinds, All the while, growth has been slowing, with the The “Great Transition” that we foresaw for 2022 has Which leads us to the outlook for 2023: we believe 2023 is likely to be challenging as well. After all, Eurozone and UK even likely to have slipped into played out to a much greater extent than we the global economy has undergone a fundamental financial conditions are all but certain to remain tight recession. originally envisioned, resulting in a new reality. and lasting reset due to the COVID-19 pandemic, and the fundamental reset of macroeconomics and shifting demographics, climate change, weakening geopolitics is continuing. Investors would thus do Looking ahead, we expect financial market volatility Over the past year, geopolitics has made a come- business investment in the wake of geopolitical well to adhere to a robust investment process and to remain elevated as risks persist and global back as a key driver of the global economy. The ruptures, among other trends. The fallout is evident diversify investments broadly, particularly as the financial conditions remain tight. This is likely to confrontation between the West and Russia over in our longer-term forecasts for the global economy, transition out of negative rates is behind us. Our create continued headwinds to growth and, by Ukraine has triggered an energy crisis as well as which we expect will grow at a much slower pace House View provides a valuable compass in this extension, risk assets. Nevertheless, investors can soaring food prices. than in the 2010–2019 period. Inflation will remain regard. find opportunities, particularly in fixed income, as we an issue in 2023, though we expect it to eventually show in this year’s Investment Outlook. Far from normalizing, international commerce has peak and start to decline. The year 2022 presented investors with a particular- reorganized according to political alliances, marking ly difficult environment. Inflation was a concern I believe that recent months have clearly reiterated the dawn of a multipolar world. As for financial markets, as inflation peaks and going into the year, and the onset of the war in the importance of adhering to robust investment monetary policy reaches restrictive territory, fixed Ukraine drove price levels up further. In response, principles, following a stringent investment process This has resulted in a new economic reality with income should become more attractive again. This central banks, first and foremost the US Federal aligned with one’s long-term financial objectives and more elevated inflation and a monetary policy regime means that the performance of bonds and equities Reserve, brought forward rate hikes and have all but seeking broad diversification, including alternative prioritizing inflation stability over growth. As a result, should again diverge, as we expect equity markets demonstrated their determination to bring inflation investments. Preserving wealth is our singular focus, interest rates are at their highest in years and could still be volatile in the first half of 2023 as down by tightening monetary policy aggressively. and we remain fully committed to this goal as the economic growth is slowing. slower economic growth hits company earnings. Indeed, they will not be able to slow the pace of rate fundamental reset continues. hikes before realized inflation falls persistently. Financial markets could not evade these develop- We hope you find the insights in our Investment ments, with equities and bonds firmly in negative Outlook 2023 useful, as you navigate and adjust to territory in 2022. Bonds were unable to act as an this reset. effective source of diversification within portfolios (their traditional role), as there was a stronger correlation between the two asset classes due to the turbulent macroeconomic environment and tighter monetary policy regime.

Headlines that moved the markets in 2022 8 | 9 3 February 2022 4 May 2022 21 July 2022 22 September 2022 23 September 2022 11 October 2022 20 October 2022 Tech giant Fed launches ECB surprises SNB ends GBP falls on Global growth to The down- biggest rate hike with hawkish era of mini-budget decline in 2022 turn of the since 2000 rate hike The GBP fell to its lowest Global economic growth is set negative level against the USD since to nearly halve in 2022, as JPY plunges The US Federal Reserve The European Central Bank 1985 after the new UK high inflation, rising interest (Fed) raised its benchmark (ECB) surprised the market rates prime minister unveiled a rates and the Ukraine war The Japanese yen (JPY) rate by 50 basis points, as it with a larger-than-expected mini-budget that would take a toll. Economic growth experienced its worst ever seeks to tame soaring rate hike of 50 basis points. The Swiss National Bank significantly increase its worldwide is expected to decline against the USD, on Q4 results inflation. The rate hike was Considering the elevated (SNB) raised its policy rate to deficit. In response, the GBP decline to 3.2% in 2022 and losing close to 50% of its the biggest since 2000, and inflation risks, the ECB’s 0.50% at its September fell 3.7% against the USD, 2.7% in 2023, compared value from a high in early A US technology giant rates, which would weigh on the Fed also announced Governing Council believes “it meeting, delivering the while the yield on 10-year with 6.0% in 2021, according 2012. In the year to date, the suffered the biggest one-day their future valuations as it plans to begin reducing its is appropriate to take a larger largest policy rate increase UK government bonds to the International Monetary JPY has depreciated by 23% decline in value for a US will cost more to borrow balance sheet next month. first step on its policy rate since March 2000. The SNB jumped by 33 basis points to Fund (IMF). Global inflation is against the USD due to the company amid disappointing money to finance their US equity markets responded normalization path than raised its policy rate by 0.75 3.82%. The new mini-bud- forecast to increase to 8.8% Bank of Japan’s ultra-loose Q4 results. The stock lost businesses. Additionally, the positively after the Fed signaled at its previous percentage points, from get effectively raises the in 2022 from 4.7% in 2021, monetary policy with yield 26%, wiping USD 230 billion surge in demand that many downplayed the likelihood of meeting,” the ECB said in a -0.25% to 0.50%, following UK’s deficit from 6.0% of though it should ease to curve control while the rest of off its market value and tech companies enjoyed 75 basis point hikes at “the statement. Inflation in the its September meeting. With gross domestic product 6.5% in 2023 and 4.1% in the world – and the USA in pulling down other technolo- during the COVID-19 next couple of meetings.” Eurozone has skyrocketed far the decision, the SNB puts (GDP) in 2021 to 7.5% of 2024, the IMF says. particular – hikes interest gy stocks. Tech stocks are lockdowns appears to have The S&P 500 Index climbed above the ECB’s medi- an end to the negative GDP in 2022, up from 3.9% rates substantially, leading to coming under pressure amid peaked, leading to concerns 3%, while the Nasdaq um-term target of 2%, reach- interest rate policy it imple- in the March budget and the a meaningful rates differential. expectations that elevated about softer revenues going Composite Index finished the ing a record 8.6% in June mented in January 2015. third-highest level since the inflation will force central forward. day up 3.2%. due to accelerating prices for Furthermore, it remains 1940s. This will exert 24 October 2022 banks to start raising interest food and energy. willing to intervene in the pressure on the Bank of foreign exchange market. England to hike policy rates New UK 24 February 2022 25 April 2022 5 September 2022 13 September 2022 by 75 basis points in Novem- ber, given the rise in medi- prime minister Brent jumps COVID policies Energy crisis in Inflation um-term underlying inflation- above USD 100 hurt China equities Europe ary pressures. Rishi Sunak is set to become and continue to shrink the report puts the new UK prime minister, risk premium in UK assets, on Ukraine war China’s main equity indices European natural gas prices 11 October 2022 succeeding Liz Truss, who the government will still need declined amid concerns about jumped 15%, adding to large US stocks stepped down after a short to show a fiscally credible Brent crude oil spiked above how the country’s strict increases since the start of Hong Kong shares hit and volatile tenure. While his path in the budget to balance USD 100 for the first time zero-COVID policy could the year, after Russia’s major under appointment should help in the books. since 2014 after Russia impact global supply chains state-owned natural gas 13-year low rebuilding the UK’s credibility invaded Ukraine. Assets and the economy. The producer halted gas supplies pressure viewed as safe havens, Shanghai Composite Index to Western Europe, adding to Hong Kong’s benchmark infections have been on the 9 November 2022 including the USD, gold and fell 5.1% on 25 April, while concerns about Europe’s US stocks suffered their equity index hit a 13-year rise recently. The Chinese the JPY also gained (the Hong Kong’s Hang Seng impending energy crisis and biggest sell-off since June low, as large cities in China government, which is set to latter two only temporarily), Index slipped 3.7%. China the impact on an already 2020 after a higher-than-ex- once again tightened their hold its 20th National Party US midterm while global equity markets continues to uphold its slowing economy. The move pected US inflation report. COVID-19 restrictions. The Congress later this month, is declined. Simmering tensions zero-COVID policy as other put pressure on both the Core consumer price index Hang Seng Index fell by keeping its strict COVID-19 between Russia and Ukraine countries slowly begin to GBP and EUR, which (CPI) inflation was 0.6% in 2.29% to 16,801, the lowest policy firmly in place, which is escalated substantially this ease their restrictions. At the declined against the USD August month-on-month, level since 2009. While the contributing to China’s elections year, culminating in Russia’s beginning of April, Shanghai tightened. European coun- clearly above the 0.3% number of COVID-19 cases deteriorating growth outlook. decision to launch attacks on implemented a strict lock- tries announced special pack- consensus forecast. Along remains low in China, The US midterm elections spending or tax initiatives several targets in Ukraine. down that remains in place. ages to shield consumers and with better-than-expected US are likely to lead to a divided highly unlikely, we doubt that The outbreak of war will have Lockdowns over the course industries from rising power employment data, the upside government. Although this it would lead to a govern- consequences, not only for of the pandemic have disrupt- costs. Nevertheless, sharply inflation surprise makes a 75 would make new fiscal ment shutdown. Europe’s energy supply and ed global supply chains, higher energy prices and basis point rate hike the base growth dynamics, but also for leading to shortages for many rising interest rates threaten case for the US Federal global commodity supply goods and contributing to to cripple the region’s Reserve’s September chains. rising inflation across the economy. meeting. world.

Core views 2023 10 | 11 Credit Suisse House View in short Economic growth Fixed income Foreign exchange Real estate We expect the Eurozone and UK to have slipped into With inflation likely to normalize in 2023, fixed The USD looks set to remain supported going into We expect the environment for real estate to recession, while China is in a growth recession. income assets should become more attractive to hold 2023 thanks to a hawkish US Federal Reserve and become more challenging in 2023, as the asset These economies should bottom out by mid-2023 and offer renewed diversification benefits in portfoli- increased fears of a global recession. It should class faces headwinds from both higher interest and begin a weak, tentative recovery – a scenario os. US curve “steepeners,” long-duration US stabilize eventually and later weaken once US rates and weaker economic growth. We favor listed that rests on the crucial assumption that the USA government bonds (over Eurozone government monetary policy becomes less aggressive and over direct real estate due to more favorable manages to avoid a recession. Economic growth will bonds), emerging market hard currency debt, growth risks abroad stabilize. JPY weakness should valuation and continue to prefer property sectors generally remain low in 2023 against the backdrop investment grade credit and crossovers should offer persist in early 2023, but eventually reverse as the with strong secular demand drivers such as logistics of tight monetary conditions and the ongoing reset interesting opportunities in 2023. Risks for this Bank of Japan alters its yield curve control policy. real estate. of geopolitics. asset class include a renewed phase of volatility in We expect emerging market currencies to remain rates due to higher-than-expected inflation. weak in general. Inflation and central banks Private markets & Equities Commodities hedge funds Inflation is peaking in most countries as a result of decisive monetary policy action, and should eventu- We see 2023 as a tale of two halves. Markets are Commodity baskets offered protection against In a more volatile 2023, we see opportunities for ally decline in 2023. Our key assumption is that it likely to first focus on the “higher rates for longer” inflation and geopolitical risk in 2022. In early 2023, active management to add greater value, particularly will remain above central bank targets in 2023 in theme, which should lead to a muted equity perfor- demand for cyclical commodities may be soft, while for secondary managers, private yield alternatives most major developed economies, including the mance. We expect sectors and regions with stable elevated pressure in energy markets should help and low-beta hedge fund strategies. For seasoned, USA, the UK and the Eurozone. We do not forecast earnings, low leverage and pricing power to fare speed up Europe’s energy transition. Pullbacks in risk-tolerant investors, we also highlight co-invest- interest-rate cuts by any of the developed market better in this environment. Once we get closer to a carbon prices could offer opportunities in the ments, i.e., direct investments in an unlisted compa- central banks next year. pivot by central banks away from tight monetary medium term, and we think the backdrop for gold ny together with a private equity fund. policy, we would rotate toward interest-rate-sensitive should improve as policy normalization nears its end. sectors with a growth tilt.

Find out more Global economy

Global economy A fundamental reset 14 | 15 Past the peak A fundamental reset Global trade (goods and services) in % of GDP 70% 60% For many years, geopolitics played a minor role in the global economic and 50% financial outlook. These were the times of stable international relations and a 40% relatively high degree of multilateral trust among countries. Though crises did occur, most of them were for financial reasons. Cracks in that world order 30% started to appear in 2017, with the first economic tensions emerging be- 20% tween the USA and China on tariffs and trade under former US President 10% Donald Trump. Under US President Joe Biden, rivalries evolved to confronta- tions involving more sectors and regions, which came to a head in 2022 with 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 the war in Ukraine. Last data point 2021 Source Haver Analytics, Credit Suisse In hindsight, 2022 marks the year when geopolitics After decades of growth in global trade as a share of took center stage once again, not only significantly global gross domestic product (GDP), the volume of impacting the global economy and financial markets, goods and services exchanged as a percentage of Out with the old monetary regime This has prompted us to increase our forecasts for but resetting international relations and commerce GDP peaked in 2008 and has fluctuated in a range 2022 also marked the end of “lowflation,” a side central bank policy rates in all major economies for many years to come. This has implications for between 50% and 60% ever since. The COVID-19 effect of globalization. Indeed, COVID-related except China. We now expect the fastest pace of short-, medium- and long-term growth, price pandemic and, more recently, political sanctions, disruptions of global supply chains, more decisive tightening on a 12-month basis and of the largest prospects and monetary and fiscal policy, potentially have forced companies to prioritize supply chain climate policy action and a full-fledged energy crisis magnitude globally since 1979. Although we expect leading to sizable shifts in the global monetary resilience over prices since 2020, which has changed and food price shock in the wake of the Ukraine war the pace of tightening to peak by end-2022, we do system with reverberations in financial markets. trade flows substantially. International trade is now led to a new regime of elevated inflation. Not only not forecast any developed market central bank to reorganizing in closer alignment with geo political did volatile energy and food prices drive up headline cut interest rates in 2023, as they are focused on New world order alliances, and a shift toward repatriation and domes- inflation, but wage increases also allowed less actual rather than expected inflation. The world of multilateralism and strong mutual trust tic development has started for strategic sectors. We volatile price categories like travel, hospitality and between countries and governments came to an believe this trend will continue for at least the next medical services to rise, lifting core inflation to end – or at the very least paused – in 2022. Deep 2–5 years until potential political change in various multi-decade highs. and persistent fractures emerged in the geopolitical parts of the world may bring a different political and world order, giving rise to a multipolar world that we economic agenda in focus again. Central banks saw themselves forced to tighten believe is likely to last for years. The global West monetary policy in bigger increments and more (Western developed countries and allies) has drifted swiftly than expected, thus ending the phase of low away from the global East (China, Russia and allies) or even negative interest rates. Although we believe in terms of core strategic interests, while the global inflation is peaking in most countries as a result of South (Brazil, Russia, India and China and most decisive monetary policy action, central banks are developing countries) is reorganizing to pursue its signaling that they need to hike rates further to own interests. reduce demand and create slack in labor markets. One reason for this is that price increases have broadened from a limited group of supply shocks to widespread inflation. Crucially, tight labor markets and higher wage growth risk making broader inflation persistent.

Global economy A fundamental reset 16 | 17 From transitory to entrenched Lower-for-longer era ends Headline inflation for USA, Japan, Eurozone, Switzerland and UK (% YoY) Selected central bank rates and forecasts 11 7% 6% 10 5% 9 4% 3% 8 2% 7 1% 0% 6 -1% 5 2007 2009 2011 2013 2015 2017 2019 2021 2023 US Federal Reserve European Central Bank Bank of England Swiss National Bank 4 Last data point 01/11/2022 Source Bloomberg, Credit Suisse 3 2 1 0 Growth outlook dims Beyond the 2023 outlook, the transformed geopolit- More monetary tightening, rising real yields, energy ical environment suggests less international cooper- price shocks in Europe, China’s ongoing property ation on technological innovation, less free move- –1 market downturn and COVID-19 lockdowns have ment of human talent and hence smaller productivity led us to cut our forecasts for GDP growth across gains. As a result, we foresee lower potential growth the board. We now forecast recessions in the over the next five years. – 2 Eurozone and the UK, and a growth recession in China. These economies should bottom out by Moreover, the geopolitical events in 2022 have mid-2023 and begin a weak, tentative recovery – increased the risk that climate action will be uncoor- – 3 a scenario that rests on the crucial assumption that dinated across regions and even possibly postponed. the USA manages to avoid a recession. Our base In a disorderly climate transition, the negative supply case is for the US economy to grow 0.5% in Q4 shock will ultimately be larger, leading to higher infla- 2008 2010 2012 2014 2016 2018 2020 2022 2023 compared with the prior-year period, but we tion and lower growth in the medium term, accom- acknowledge that the risks are skewed to the panied by bouts of volatility as climate policy USA Japan Eurozone Switzerland UK downside. arbitrarily evolves across regions. This amplifies our expectations of a new macro regime with elevated inflation and lower potential growth. Last data point 15/10/2022 Source Bloomberg, Credit Suisse

Global economy A fundamental reset 18 | 19 Challenging environment in 2023 in The USD in a divided world In the longer term, however, the resetting of Although we expect this downturn to end and the developed markets As long as the rhetoric of the US Federal Reserve international relations may lead to new develop- recovery to resume in 2024, we also see lasting Governments are introducing support measures and (Fed) remains hawkish, the USD should enjoy ments in the global monetary system. Today’s damage to economic structures. The pandemic has increasing public spending to address current continued support, with USD strength tightening USD-based monetary system, with most global combined with demographic trends to weaken the politically induced challenges. In many developed monetary policy globally. To prevent currency trade denominated in USD and 90% of all currency outlook for labor supply. Geopolitical ruptures are countries, budget deficits are already running at 4% depreciation from exacerbating imported inflation, transactions having one USD leg, is still a reflection weighing on trade and leading to persistently weaker or higher in 2022 and are unlikely to improve materi- the European Central Bank will need to keep pace of the post-World War II era. This system has gone business investment. In China, the policy shift back ally in 2023. with the Fed even though the Eurozone faces through one big reform (from the gold standard to to a state-driven growth model will likely erode the recession. Weakness in the JPY looks increasingly flexible exchange rates), involved change in the outlook for productivity growth. As became apparent in the UK after the new likely to force the Bank of Japan to shift away from monetary policy setting (from targeting money government announced an expansionary mini- its current easing bias to allow Japanese yields to supply to targeting inflation to quantitative easing) Taken together, we have cut our longer-term growth budget (which was later scrapped), financial markets rise. Moreover, continued USD strength is likely to and seen reforms in the monetary reserve policies forecasts for all the major economies. For the USA, are quick to reject unsustainable fiscal policy, pull capital from emerging markets. and tools (from reserves to the introduction of swap we forecast an average real GDP growth rate of especially when it comes on top of unsustainable lines between key central banks). However, it has 1.5% over a five-year horizon, significantly below the external balances, i.e., a high current account deficit. With the real trade-weighted USD already at its never been challenged. average growth of 2.2% for the 2010 – 2019 period. As a result, governments will over time either resort strongest level since 1985, it seems reasonable to For the Eurozone, we forecast an average growth to tax increases to finance permanent increases in expect the currency to peak and potentially lose The new multi polar world and the resetting of rate of 1.1% and for China growth of 4.4%. defense expenses and support programs, or risk some ground in the latter part of 2023. Yet this will international trade may well, over time, lead to the large public debt increases. In highly indebted likely require the Fed to signal an end to its tight- emergence of two parallel monetary systems: the On a positive note, the major central banks appear countries, sovereign bond yields will therefore again ening and some signs of economic recovery outside current USD-based system as well as a yet-to-be committed to returning inflation rates close to their be at risk of rising sharply. the USA. conceived alternative system bypassing the USD. 2% targets. Inflation may remain above target in The degree to which this may influence foreign 2023, but should return close to target from 2024. demand for the USD as a reserve currency and for However, the cost of achieving this will be per- US government bonds as reserve assets will sistently higher interest rates and lower trend growth. determine the future of the USD. Long-term outlook: Lower growth The energy shock to Europe from Russia’s invasion of Ukraine and the growth recession in China have hurt the post-pandemic outlook. The Eurozone is In the red: Budget deficits across countries likely in recession and the USA, though still growing Overall government balances in % of GDP slightly in our baseline forecast, is at high risk of recession. 4 0 – 4 – 8 India China Japan Brazil Italy France Spain UK USA Germany Russia Switzerland 2022 2023 Last data point 10/2022 Source International Monetary Fund (IMF) forecast as of October 2022

Global economy Regional outlook 20 | 21 Regions in focus USA Latin America UK Switzerland A close call Tougher times ahead Credibility in question Consumption is holding up US growth will average close to zero in We now project 2022 regional real GDP growth of 3.0%, up The UK entered a recession in Q3 2022. Despite slower economic growth, we believe 2022, according to our estimates, and from our previous forecast of 2.0%, as we expect stronger We expect the economy to continue to the Swiss economy will avoid recession, as remain in a slump at 0.5% in Q4 2023 growth in Brazil, Colombia and Mexico. For 2023, our contract through most of H1 2023, with a private consumption should remain solid. The versus the prior-year period. The probability regional growth forecast is 0.4%, down from 0.7%, driven by peak-to-trough GDP decline of 1.0%. The unemployment rate has declined to the of recession is high (above 40%), but expectations of weaker growth in several countries, particular- UK’s fiscal stimulus is likely to imply a lowest level in 20 years, and consumers are recession is still not our base case. Tighter financial conditions ly Brazil and Mexico. Inflationary pressures have been shallower winter recession, but risks to growth are to the still in the mood for spending thanks to the high degree of are leading to a pullback in cyclical spending, namely goods stronger and more widespread than we initially expected, downside, given the reversal of some fiscal stimulus mea- personal job security. Furthermore, immigration has picked up consumption and housing, but healthy balance sheets and a making the disinflation process challenging. By year-end sures, spending cuts, tapering of energy support and again and should prove a substantial growth driver in 2023. resilient labor market should act as a buffer against an 2023, annual consumer price inflation in inflation-targeting tightening of financial conditions. Near-term inflation is likely The surge in energy prices is feeding through to household outright downturn, in part thanks to a continued recovery in countries in the region will likely remain significantly above to have peaked, but we expect inflation to fall only slowly and expenses only in a limited manner due to price regulation, a spending on services. Inflation is beginning to moderate, but central banks’ targets. We now see nearly all inflation-target- stay above target in 2023. Fiscal support is keeping upward strong CHF and a relatively low weight of energy in private core personal consumption expenditures (PCE) inflation, the ing central banks in the region taking their policy rates to pressure on underlying inflation in the medium term. The consumption expenditure. As a result, inflation in Switzerland Fed’s preferred inflation measure, is likely to remain stubborn- double-digit territory before the end of 2022, with easing combination of the government’s expensive fiscal package is much lower than elsewhere, and we expect it to slow ly high at around 3% as of year-end 2023. We thus expect cycles unlikely to start until late 2023. and a dovish response from the Bank of England (BoE) further in 2023. Against this backdrop, there is a relatively the Fed to continue to tighten aggressively. We expect challenged market confidence in UK policy. To some degree, modest need for the Swiss National Bank (SNB) to tighten another 100 bp of hikes by the end of Q1 2023, up to a confidence has been repaired with the reversal on the monetary policy further. We expect the SNB to raise its policy terminal rate of 4.75%–5.0%, which we expect to remain Gulf Cooperation Council (GCC) extremes of the fiscal package and the announcement of a rate by another 0.5 percentage points by March 2023 and steady for 2023. fiscally credible plan. Full restoration of credibility likely subsequently keep it at 1% for the rest of the year. requires persistent monetary tightening by the BoE. We now Beneficiaries of geopolitical fractures expect the bank rate to rise to 4.5% by mid-2023. Failure to Eurozone In 2022, the GCC economies broadly benefitted from the take it there risks inflation being higher for longer, further Japan windfall of higher oil prices and a boost to their domestic weakness in the GBP, higher risk premiums and eventually economies following the pandemic and the transformed higher terminal rates, which could worsen the severity of the Energy crisis dominates geopolitical environment. We expect the GCC’s GDP growth recession. Above-target inflation in 2023 implies we do not Creeping toward a policy shift We believe recession in the Eurozone started in Q4 2022 and to moderate to 3.4% in 2023 after 6.1% in 2022 as slowing forecast any rate cuts in 2023 despite a recession. Japan’s economy is likely to see low growth of 0.5% in 2023, will persist until late Q1 2023, with a peak-to-trough fall in global growth will eventually impact their economies. supported by an easing of COVID-19 restrictions and some GDP of about 1%. Fiscal policy support, resilient labor Nevertheless, the region looks set to grow more rapidly than strength in the labor market. The jury is still out on how much markets and high savings should mitigate the depth of the the global average, supported by still elevated oil prices. As a China JPY weakness will benefit Japanese exports given damage to downturn, but the risks are to the downside amid persistent result, 2023 should see the fiscal surplus easing modestly to supply networks and downward pressure on the global uncertainty over gas supply. Headline inflation may be peaking 7.1% of GDP and the current account surplus to 15.0%. A electronics cycle. The key change that we see for the but is likely to decline only gradually as price pressures have better measure of economic activity is non-oil GDP growth, Modest recovery in 2023 Japanese economy is that inflation is likely to remain above broadened and wage growth has gained momentum. We which we expect to ease from 4.8% to 4.3% over the same We forecast below consensus growth of 2% through H1 2023. We think this, as well as downward expect persistently high inflation and currency weakness to period. This underscores the importance of transformation 4.5% for China in 2023, a bounce from pressure on the JPY due to the hawkish Fed, should lead the push the European Central Bank to hike rates aggressively to plans across the GCC, which are revitalizing the private sector. 3.3% this year. Lower growth potential, Bank of Japan to adjust its policy of yield curve control in early a terminal rate of 3% by early 2023. In our view, rate cuts are The combination of targeted government subsidies and a firm fiscal consolidation and a slow shift away 2023 to allow for slightly higher yields. unlikely in 2023. peg to the USD is expected to keep inflation below 3% in 2023. from the government’s zero-COVID policy should constrain the economy. A likely continued decline in land sales beyond 2022 will probably prolong the risk of policy hesitation at the local government level even after the eventual end of COVID-19 disruptions. The decisive factor will be how quickly China can move away from these disruptions, and our expectation is that it will do so gradually. Timing-wise, we expect China’s mainland reopening to lag that of Hong Kong by six months. Hence, any meaningful reopening is expected to happen only toward the end of Q1 2023.

Global economy Investment roadmap 2023 22 | 23 The fixed income renaissance As bond yields reset at higher levels, inflation peaks, Trends to watch and central banks stop rate hikes, fixed income returns look more attractive. Emerging market hard currency sovereign bonds, US government bonds, investment grade corporate bonds and selected yield curve steepening strategies look particularly interesting. Equity markets remain volatile An end to rate hikes as inflation peaks Contraction of equity markets’ valuation is well As inflation peaks and eventually starts to decline, advanced, though challenged corporate profitability central banks will stop hiking rates in Q1/Q2 2023. from the weak economic backdrop and margin However, we do not expect rate cuts in 2023 pressure should still lead to headwinds and volatility because inflation will remain above central bank going into 2023. We prefer defensive sectors, targets. regions and strategies with stable earnings, low leverage and pricing power, such as Swiss equities, healthcare and quality stocks. Defensive Super- trends such as Silver economy, Infrastructure and Climate change should also prove less volatile. Growth set to stay low Global growth is decelerating, and with monetary policy reaching restrictive territory, we believe that it will generally stay weak in 2023. ts USD seen staying strong The USD should be supported by its interest rate e advantage for most of 2023. As a result, we expect the USD to stay strong, particularly versus emerging Fiscal challenges ahead market currencies such as the CNY. However, some Public support measures to combat the cost-of-living developed market currencies such as the JPY are crisis and increasing defense spending mean budget now undervalued and could stage a turnaround and deficits will stay high. As borrowing costs remain appreciate at some point. elevated, governments are likely to increase taxes to finance spending. A good year for most alternative investments Hedge funds should deliver above-average returns, Globalization dialed back and 2023 is also likely to be a good vintage year for As the world becomes more multipolar with the private equity. Secondaries and private debt should emergence of various political spheres of influence, do well. In real estate, we prefer listed over direct we expect global trade as a share of GDP to decline solutions. and strategic sectors to be repatriated. conomics Multi-asset diversification returns As bond yields have reset at higher levels, fixed E Financial mark income as an asset class has gained relative attractiveness compared to equities. Diversification benefits should return as central banks stop hiking rates.

Find out more Main asset classes

Main asset classes 26 | 27 Yields make a comeback The world – and financial markets – have experienced a long list of shocks in Such an environment is conducive to more defensive Investors can build more robust portfolios by the past few years: global trade tensions; the COVID-19 crisis; massive liquidi- equity strategies, and we favor companies that can complementing these more traditional asset classes defend profit margins by passing on higher costs and with non-traditional ones that offer different features, ty injections and fiscal transfers to households leading to supersized de- which operate in fields with high barriers to entry – in our view. For example, the current environment of mand for goods; disrupted manufacturing and supply chains; and the energy characteristics that can be found in defensive quality slow growth, increasing interest rates and elevated segments. Once the interest rate environment starts volatility is advantageous to certain hedge fund price shock. While the resulting spikes in inflation and interest rates caused to stabilize and uncertainty clears, however, we think strategies, which can thus help to navigate this havoc in capital markets in 2022, they may well have laid the foundation for a it will be time to shift into quality growth companies difficult investment backdrop. Similarly, for investors that are currently facing substantial headwinds from who can accept limited liquidity in investments, more normal investment environment going forward. increasing rates. private markets that encompass both private equity and debt investments should help to enhance return profiles as the ongoing market disruptions open up opportunities. For the past several years, only a narrow set of Our preferred approach to adding bonds to a asset classes have offered a meaningful positive portfolio will evolve throughout 2023. At the return contribution to a portfolio, typically associated beginning of the year, adding duration is unlikely to with greater investment risks. In particular, return be outright attractive for most currencies, with the expectations from core fixed income had been USD being an exception. Emerging market hard cur- meager at best amid a lower-for-longer interest rate rency bonds already offer an attractive return outlook environment. Until recently, the broad consensus as yields have reached levels that are rare in a was that the world would have to go through a slow historical context and compensate handsomely for and gradual interest rate normalization, which would the investment risk. Corporate credit from invest- create a constant headwind for bond returns. ment grade-quality issuers will likely become Instead, the Band-Aid has been ripped off as interest attractive once central banks signal a slowing of the rate tightening occurs at the fastest pace in decades, tightening cycle. For high yield corporate credit, we Bonds vs. equities in 2023 and bond yields in different currencies quickly maintain a more cautious view as credit spreads do normalize and start to offer a more attractive return not properly reflect the challenging economic Higher inflation and rising interest rates should of geopolitical tensions and the looming energy outlook. environment, in our view. translate into lower prices for equities and bonds. crisis. Additionally, while inflation may eventually This is because future cash flows are discounted at come off the current highs, the risks are skewed Bonds are back Headwinds for equities a higher rate. Thus, higher inflation uncertainty toward a protracted tightening cycle, which would We believe that core bonds will once again play a The environment remains challenging for equity should trigger larger, synchronized swings in the lead to rising real yields. Rising real yields would more relevant role within portfolios going forward. markets, as we expect the nominal economic growth discount rates of equities and bonds, which would prevent bond prices from rallying at a time when Yields have now reached levels that offer some rate to slow substantially, thereby reducing revenue result in an upward shift in the bonds-equities equities come under further pressure, limiting their protection against adverse market effects that will growth potential. Furthermore, close to record-high correlation and reduce the diversification potential of diversification benefits and keeping the bonds-equi- likely occur as we work through a period of substan- corporate profit margins will likely come under bonds. This is indeed what we have witnessed over ties correlation at elevated levels. tial economic uncertainty. Furthermore, we assume pressure and start to reflect various cost pressures, the past two years. that the diversification benefits of adding bonds to a including the energy price shock, higher wages and In our view, 2023 may present a bifurcated picture. portfolio, which are absent in 2022 as both equities more expensive financing costs. In contrast, growth shocks should primarily affect Initially, the bonds-equities correlation should remain and bonds have declined, should return, especially equities, via a depressed earnings growth outlook elevated, limiting bonds’ diversification potential. once growth risks start to dominate the headlines. and lower expected dividends. Bonds, on the However, as inflation uncertainty peaks and the That said, we acknowledge that we may not have contrary, may benefit from such a scenario as yields focus shifts to growth risks, the bonds-equities reached the peak in bond yields yet, for example if a fall on the back of lower inflation expectations and correlation should start to drift lower, making bonds potentially more pronounced reduction of central ultimately looser monetary policy. With growth risks more attractive from both a returns and diversifica- banks’ balance sheets should occur. This is why abounding at the moment, conventional wisdom tion perspective. The caveat is that this shift in focus bond market volatility is likely to remain elevated in suggests that we should see a retracement of the may take time, and that extended hawkish central the near term. bonds-equities correlation. The problem is that bank action may keep the bonds-equities correlation inflation uncertainty remains a concern for the above the levels seen in the past two decades. immediate future, particularly against the backdrop

Main asset classes Fixed income 28 | 29 Watch the curves For 2023, we expect the yield curve to steepen, i.e., As the Fed hiked interest rates aggressively, bond the spread between 10-year and 2-year yields to Worst may be over for yields rose more for short maturities than for longer increase. The extent of this steepening will depend maturities. For example, the spread between the on the macro circumstances. A scenario in which 10-year and 2-year US Treasury yields declined from the Fed reacts to rising recession risks by cutting +80 basis points at the start of 2022 to –50 basis interest rates would most likely lead to a significant fixed income points at the end of Q3 2022. Long-term yields are yield curve steepening, as short-term yields would currently lower than short-term yields because the fall more than long-term yields. But even in our base market expects economic growth to slow and case of a normalizing economic outlook (i.e., growth monetary policy rates to fall again over time. remains below trend), some gradual steepening of the US yield curve can be expected. With monetary policy tightening likely to slow or end in 2023, we believe fixed income assets will become more attractive to hold. Particularly, emerging market hard currency bonds are likely to deliver high returns. Moreover, if inflation declines as we expect, we think that fixed income, especially government bonds of countries with fiscal policies that can be sustained, should offer valuable diversification benefits in portfolios. Risks to the asset class include a renewed phase of volatility in rates, for example due to higher-than-e xpected inflation. Elevated inflation has prompted central banks higher, weighing on the asset class from a total around the globe to hike interest rates meaningfully, return perspective. If inflation indeed cools, as we leading to a sharp tightening of global monetary expect, we believe that government bonds will offer US rates should peak with activity slowing conditions. Given the shock of high energy prices valuable diversification benefits for multi-asset 10-year US Treasury yields vs. US ISM index and rapidly rising inflation expectations, central portfolios. banks were forced to hike interest rates faster and 3.0 more forcefully than in previous tightening cycles. Higher return potential in US Treasuries 25 Bond yields rose significantly in both nominal and Across the major markets, we see the most duration 2.5 real terms, including sovereign bonds in developed potential in USD, and less in EUR. The US Federal 20 2.0 markets. Both US and Bund 10-year yields are up Reserve (Fed) started to hike rates earlier and more more than 200 bp in the year to date, currently at meaningfully than the European Central Bank (ECB), 15 1.5 3.81% and 2.01%, respectively, as of 10 November. which maintained negative interest rates until July 2022. Not only does the ECB have to catch up now, 10 1.0 Our expectation is that central banks will slow the but the Eurozone is also facing higher inflation and 0.5 pace of rate hikes or end hikes altogether as greater uncertainty regarding energy prices this 5 economic growth deteriorates and inflation cools. As winter. High inflation together with currency weak- 0.0 central bank expectations stop driving yields higher, ness will likely force the ECB to raise rates aggres- 0 the return outlook for sovereign bonds should sively even in a recession. Given the current rate – 0.5 improve significantly. In contrast to 2022, we differentials and the different outlook in terms of – 5 –1.0 anticipate that the return outlook for global treasury further rate hikes, we see greater return potential in indices will be positive in 2023. Opportunities to US Treasuries than in Eurozone government bonds. –10 –1.5 increase duration in bond portfolios are also likely to Heightened concerns about European sovereign – 2.0 arise once bond yields approach their cycle peaks. debt could make this relative move even more –15 Government bonds have seen their performance pronounced. – 2.5 weaken alongside risk assets, as rising inflation 2008 2010 2012 2014 2016 2018 2020 2022 drove policy rates and the whole yield structure US Treasuries 10y yield (12-month changes, rhs, %) US ISM (12-month changes, index) Last data point 31/10/2022 Source Bloomberg, Credit Suisse

Main asset classes Fixed income 30 | 31 Investment grade starts to look interesting to refinance in local markets. Against this backdrop, Rising rates make an impact Despite still robust credit fundamentals, spreads for we favor high-quality segments such as BB rated Yields of EM hard currency and local currency bonds (in %) global corporate investment grade (IG) bonds are credit, which offers investors a high implied vs. already close to the average levels of the last realized default premium. recession in 2020, which should provide some 10 buffer against a further slowdown of growth and Opportunities in emerging markets withdrawal of central bank liquidity. We expect credit As we enter 2023, the major central banks will likely 9 spreads to stabilize in 2023, as easing inflation and continue to raise policy rates, though at a slower persistent growth risks are likely to encourage pace. This may keep sovereign EM HC spreads 8 central banks to slow and eventually stop hiking above historical averages for some time. But rates. This should provide a positive catalyst for IG, negative US Treasury returns and diminishing USD 7 where credit metrics remain solid and we see few strength should result in improved returns for EM downgrade risks. Emerging market (EM) hard HC. While fundamentals in EM tend to be better 6 currency (HC) corporate debt should benefit once than in developed markets, some EM regions are global financial conditions stabilize. Moreover, the likely to prove more resilient than others. The risk of 5 asset class offers an attractive spread premium over a slowdown or recession in China and developed comparable developed market IG corporate credit markets will remain a concern for lower-rated USD Nov 15 Nov 16 Nov 17 Nov 18 Nov 19 Nov 20 Nov 21 Nov 22 with similar duration. After a significant spread issuers in open economies such as South Africa. widening in 2022, EUR IG spreads are currently Ongoing geopolitical tensions and recession risks in EM HC EM LC attractively valued. While we do not anticipate EUR IG Western Europe are expected to continue to weigh to perform strongly in early 2023, the stabilization of on Eastern European issuers. Last data point 10/11/2022 Source Bloomberg, Credit Suisse global financial conditions might offer a catalyst to unlock the attractive value EUR IG provides. In a side Despite the challenging environment, we expect EM scenario, a renewed crisis in Europe – financial or HC bonds to deliver attractive returns. The signifi- sovereign – would likely force the ECB to activate its cant coupon income they provide should offer a Transmission Protection Instrument (TPI) and/or restart sound cushion against deteriorating risk sentiment, quantitative support, which would also support EUR IG with yields near multi-year highs. Valuations remain spread compression. We therefore believe that we will attractive and fundamentals are holding up better see an attractive opportunity to enter the EUR IG than in developed markets. Moreover, they already Inflation dynamics still the main risk are also a segment that would not benefit from an market at some point in 2023. appear to reflect an economic slowdown or reces- Our base case for 2023 is for inflation to eventually eventual intervention by the ECB via the TPI. In our sionary pressures. On average, EM central banks decline, but stay above the major central banks’ targets. opinion, investors should therefore consider reduc- HY corporate defaults set to rise modestly are more advanced in their hiking cycle than their Should inflation prove to be stickier and even higher ing exposure to European senior loans and prefer US HY credit displays solid corporate fundamentals developed market peers, with inflation receding in than anticipated, for example due to surprisingly strong EUR IG credit in 2023. and a healthy market structure. Indeed, with 51% of several EM countries. Despite some stickiness, we labor market and wage inflation data, we think central US HY bonds rated BB, little debt maturity that expect inflation to continue to trend lower. As banks would have no choice but to further ratchet up Rising default risk in frontier markets needs to be renewed in 2023 and a large spread interest rates peak, an increasing number of EM their hawkish rhetoric. This would weigh on fixed The low interest rates of recent years incentivized compensation, we expect the realized default rate central banks will eventually start cutting rates. Local income performance and temporarily hit longer duration countries to take on more debt. The COVID-19 to increase modestly to the historical average of 5%. currency sovereign bonds offer yields at multi-year indices. We therefore advocate active duration crisis and efforts to provide a buffer against rising This is below the currently implied default probability highs and are expected to become more attractive management in portfolios in order to remain flexible food and energy prices led some countries to further of over 6%. In EM, the realized default rate in the later in 2023, when USD strength relative to EM should such risks materialize. In such a scenario, loosen fiscal policy. Despite lending from the HY segment (equivalent to 43% of the JP Morgan currencies is expected to fade. inflation-linked bonds might outperform within fixed International Monetary Fund, tighter financial Corporate Emerging Markets Bond Index) reached income. US real yields in particular have become conditions could result in an increasing default rate a high of over 10% in 2022 due to the war in In Brazil, for example, the central bank is very close more attractive from a long-term perspective. of distressed frontier markets. The most challenging Ukraine. However, excluding this extreme situation, to the terminal rate already. We therefore favor phase is expected in the latter part of 2023, when the realized default rate remains low. Like the global Brazil within the asset class as interest rate cuts Challenges for European senior loans central banks could be most restrictive and the HY benchmark, we expect realized defaults of EM should be possible toward the end of 2023. More- We are cautious on European senior loans. We think economic slowdown or recession is already taking HC corporate bonds to rise more modestly in 2023, over, Brazil is more resilient in the face of global spreads have not fully priced in the potential defaults its toll, but spillover risk to core EM countries is given healthier credit fundamentals, a spread macro and geopolitical risks. resulting from Russian gas supply cuts or a per- limited. premium over developed markets and the possibility sistence of current geopolitical risks. Senior loans

Main asset classes Equities 32 | 33 2023: A tale of two halves otherwise known as pricing power. In terms of While we believe that the worst of the de-rating is sectors, we like healthcare due to its defensive A tale of two halves behind us, a significant re-rating of equities would characteristics and margin stability. The relative require a shift in central bank rhetoric. We expect a valuation compared to other defensive sectors is turning point in the market to materialize in the also appealing. Furthermore, long-term growth second half of 2023. Until then, we would expect drivers like better healthcare access in emerging volatile but rather muted equity returns and would markets (EM), aging populations and new technolo- focus primarily on defensive sectors/regions offering gies (e.g., mRNA vaccines) remain intact. Our The higher-rates-for-longer theme triggered a significant de-rating (i.e., lower stable margins, resilient earnings and low leverage. preferred market in this challenging environment is valuation multiples) of equities in 2022. This theme will likely continue to Once we get closer to such a pivot, we would rotate Switzerland. Thanks to its defensive characteristics, toward interest rate sensitive sectors with a growth it tends to outperform when growth slows. In dominate during the first half of 2023, leading to muted equity performance. tilt, such as technology. addition, the earnings outlook is relatively bright, Sectors and regions with stable earnings, low leverage and pricing power with double-digit earnings growth expectations for How to position for 2023 2023. In EM, we expect Latin America to outper- should fare better in this environment. In the second half of 2023, we expect Going into 2023, investors should focus on equity form Asia. In equity styles, we currently prefer that the discussion will turn to peak hawkishness, with earnings resilience in sectors and regions that show resilient earnings quality (i.e., companies with high returns on equity, a slowing growth environment in focus. We see the technology sector as growth and an ability to defend their margins, stable earnings growth and low financial leverage). offering the most attractive returns once the US Fed pivots. The past year has been tough for financial markets, our economists do not forecast rate cuts from major including equities. The Ukraine war added to central banks, including the US Federal Reserve post-pandemic supply chain issues and fueled a rise (Fed), in 2023. in inflation to levels last seen in the 1980s. Central banks were initially slow to react but were then Earnings resilience key to watch Headwinds from real yields forced to hike aggressively. Equity valuations came Higher-for-longer policy rates will have a negative The impact of rising real yields on equity valuations under significant pressure as policy rates and real impact on the global economic outlook. Against this yields spiked across the globe. In our view, central backdrop, our economists forecast a recession in -1.5 –1.5% banks and their policies aimed at reducing inflation the Eurozone, the UK and Canada, alongside very 2121 continue to be a key driver of equity returns. This is weak growth in the USA. This will inevitably add -1.0 because higher central bank rates increase funding downside risks to corporate earnings, even more so 2020 –1.0% costs for corporations and increase the discount rate given rising costs (e.g., wages and raw materials). 19 of future earnings, which is a headwind to valuations. Consensus earnings have already been revised 19 materially lower, but the current estimate of 3.7% -0.5 – 0.5% Any signs that inflation is brought under control (i.e., growth for 2023 may still be too optimistic, in our 1818 close to central bank targets on a sustainable basis) view. Ultimately, earnings resilience will depend 0.0 would likely loosen central banks’ restrictive stance heavily on the length and magnitude of the economic 1717 0.0% and could therefore trigger a re-rating in equities slowdown, but we see rising risks of an earnings 16 (i.e., higher valuation multiples). However, we do not recession (i.e., negative earnings growth in 2023). 16 think this will be the case in the first part of 2023 as 0.5 0.5% 1515 1.0 1414 13 1.0% 13 1.5 1.5% 1212 Jan 18 Jan 19 Jan 20 Jan 21 Jan 22 MSCI AC World 12m fwd P/E US 10-year real yield (inverted, rhs) Last data point 07/11/2022 Source Refinitiv, Credit Suisse

Main asset classes Equities 34 | 35 As 2023 progresses and if markets show increasing exploring actively managed solutions. Regarding confidence that central bank guidance regarding pol- downside risks, stubbornly high inflation with icy rates (or expectations thereof) reaches a peak, resilient demand is high on the list. In such a Equity theme: Pricing power we would increase exposure in technology stocks. In scenario, central banks would be forced into even 2022, technology has underperformed given its high more tightening, which could lead to a more severe sensitivity to interest rates. However, the sector recession further down the road. A broadening of generates by far the largest cash flow with little the Ukraine war or a flare-up in hostilities between leverage and has a strong secular growth story. China and the USA over Taiwan would also weigh on Pricing power and margin developments remain a Gross and profit margins – notably, the ability to equities, with defense likely one of the few sectors key theme for investors as elevated inflation is likely maintain and grow margins at sustainable rates – Increased volatility means more tactical to benefit. Fresh COVID-19 mutations would to persist for longer at a global level into 2023. One are key determinants of pricing power, in our view, investment opportunities support the healthcare sector. Regarding upside way for investors to protect themselves from rising as they can signal inelastic demand and the ability to The multiple risks discussed are contributing to risks, a faster-than-anticipated decline in inflation, input costs is to select sectors or companies with increase profitability. When adjusting for growth elevated equity volatility, which is likely to last well which would give the Fed more freedom to steer pricing power. We define pricing power as the ability trends, gross margin stability is historically highest into 2023. In such an environment, we believe toward a soft landing, would benefit risky assets in of a company or sector to pass costs on without a for consumer staples, healthcare and IT. Profit diversification remains key and see merits in general and the tech sector in particular. significant impact on margins and/or earnings. We margin stability is highest for consumer staples, recognize, however, that due to a wide variety of healthcare and consumer discretionary. For consum- factors (e.g., market structure, location), not all er staples and healthcare, this indicates that these sectors or companies are equally able to pass on sectors are capable of increasing costs with a costs and stay ahead of the curve. relatively limited impact to their bottom line. As we assessed pricing power, we considered We conclude that sectors with pricing power have market concentration and margin stability. Market high profit margin stability, which in our view is also concentration measures the extent to which market reflected in consistent earnings estimates. One shares are concentrated among a small number of reason for this could be that when margins are firms. Sectors with a high concentration typically stable, rising costs should be easier to pass on, have more pricing power since fewer larger firms which makes forecasting earnings more predictable dominate a market. We note that on a relative basis, and results in lower variability. Based on the factors IT, communication services and consumer discretion- we assessed, consumer staples and healthcare ary have shown the highest market concentration. display the strongest pricing power leadership Bucking the trend relative to other sectors. With global growth uncer- Earnings historically moved in line with ISM readings tainty and inflation likely to remain elevated in H1 2023, we expect these segments to prove more 180 180 resilient relative to other sectors. 80 160 Expansion 160 Pass it on 70 140 The pricing power of various sectors 140 120 120 60 60 Communication services 100 100 Utilities 50 IT 50 80 Healthcare 80 40 60 60 Consumer staples Consumer discretionary 40 30 Industrials Materials 40 Contraction 40 Energy 20 30 20 20 10 0 0 Nov 03 Nov 05 Nov 07 Nov 09 Nov 11 Nov 13 Nov 15 Nov 17 Nov 19 Nov 21 0.0 0.2 0.4 0.6 0.8 1.0 1.2 ISM Manufacturing MSCI World – 12M Trailing EPS (rhs) ISM Non-Manufacturing Vertical axis 10Y Quarterly gross margin average Horizontal axis Standard deviation of QoQ gross margin change Last data point 31/10/2022 Source Refinitiv, Credit Suisse Last data point 06/10/2022 Source Refinitiv, Credit Suisse

Main asset classes Equities 36 | 37 Sector outlook Healthcare Energy Industrials Utilities Defensiveness at a reasonable price More challenging 2023 ahead Recession risks loom large Regulation and renewables in focus Healthcare offers an appealing valuation compared to other Energy was the bright spot in 2022, but 2023 is likely to be Industrials is one of the sectors that is most sensitive to Utilities was one of the most resilient sectors in 2022, defensive sectors, and earnings in line with the equity more challenging. Strong cash flow generation and capital economic activity, especially the manufacturing and industrial benefitting from the adverse market conditions as defensives benchmark (MSCI World) for 2023. While the valuation discipline still provide some buffer, but current energy prices production segments. Our economists project that goods outperformed. We expect the macro environment to remain premium compared to broader global equities expanded appear unsustainable as non-OPEC supply is set to rise and demand is already in a recession and expect industrial favorable for the sector in 2023 as the growth slowdown and significantly after a strong performance in 2022, it is still our demand to slow, in our view. Against this backdrop, earnings production (IP) momentum to slow significantly. We expect recession risks intensify. Earnings are expected to be resilient, preferred sector in the defensive space. Healthcare equip- should decline more than for any other sector with the the capital goods and transportation segments to be affected but valuation is expensive going into 2023. We expect the ment is expected to drive growth in 2023, while pharmaceuti- exception of materials in 2023. Exploration & production by slowing global growth and recession risks, while aerospace focus to turn increasingly to regulation risks and also the cals should provide a cushion for valuation. A peak in the stocks will likely be the most vulnerable, followed by and defense may continue to benefit from escalating conflict ongoing transition to renewables as energy disruption risks USD could be a risk for the sector as it benefitted meaning- integrated oil & gas companies. Equipment and services risks and geopolitical tensions. Overall, we expect the sector persist. We see the sector performing in line with the equity fully from the USD’s strength in 2022. We also like health- should fare better as capital expenditures will likely remain to perform in line with the equity benchmark (MSCI World), benchmark (MSCI World), but a more severe slowdown/ care for its long-term growth drivers like better healthcare resilient (extracting and refining activities will still likely be with downside risks mounting going into 2023. recession than expected would argue for continued outperfor- access in emerging markets, aging populations and develop- profitable throughout 2023). mance in 2023. ments of new technology (e.g., mRNA vaccines). Consumer discretionary Information technology Equity styles Communication services Earnings back in focus High-end consumer preferred The sector lagged in 2022 given its high sensitivity to rising Quality in focus amid uncertainty Opportunities to emerge once rates peak We expect segments exposed to premium consumers, such yields. While some headwinds may persist until central banks In equity styles, 2022 was a challenging year, with strong Communication services was the worst performing sector in as luxury goods, to do well in 2023. The sector displays high are done tightening, we believe markets will refocus on the negative market directionality on the back of very hawkish 2022, as higher rates triggered a significant de-rating. The margin resiliency and pricing power, which should be a sector’s attractive fundamentals once yields plateau. IT now central banks and geopolitical events. Defensive styles such ongoing macro slowdown is likely to be a headwind for supportive factor in an environment of global growth uncertainty, appears fairly valued and offers superior earnings growth as dividend and minimum volatility fared better in a relative advertising revenues, but we believe the worst of the in our view. Valuations are attractive and consumption trends potential even in a slowing macro environment. The ability of sense alongside value, supported by higher benchmark yields. underperformance is behind us and opportunities will emerge for this sector should remain supported given the target the sector to maintain margins at elevated levels (net profit Looking into 2023, given the challenging macroeconomic once rates plateau. Valuations are no longer expensive and clientele and reopening of the Chinese economy. However, margins are close to 20%, almost double that of the MSCI backdrop and ongoing uncertainty, we believe focusing on the earnings are still expected to grow twice as fast as broader we expect the more cyclical elements of the sector to come World) is particularly attractive in the current environment. quality style would offer appropriate exposure given its focus equities. Media & entertainment has the highest growth under pressure in H1 2023 as global demand weakens. Within sub-sectors, software & services offers the most on earnings stability coupled with low financial leverage and potential, in our view, while telecom stocks are cheap with an earnings stability given its high share of recurring revenues. high return on equity (RoE), which should fare well given the attractive dividend yield. headwinds we foresee. However, should broader conditions Financials deteriorate faster and more severely than currently anticipated, Materials it would be prudent to go for minimum volatility and to some Consumer staples extent dividend styles, while value is likely more negatively Net interest income to drive earnings exposed to an outright recession. amid recession risks Earnings at risk Earnings resilience, but yields are a risk We expect financials to benefit significantly from the higher Materials stocks resisted well in early 2022, before succumb- The consumer staples sector offers high-quality companies interest rates boosting interest income and earnings, but ing to the broad-based equity sell-off. Since the sector is very with low earnings volatility and margin resilience and remains slowing global growth and recession risks argue for a more cyclical, we expect pressure to intensify in 2023. Our an interesting portfolio component in the long term, notably balanced view on the sector going into 2023. Unlike in past economists see the goods sector as the most exposed to the for risk-averse investors. Historically, the sector has been recessions, the sector appears more resilient as banks are ongoing economic slowdown, as over 90% of manufactured negatively correlated to yields and although yields rose in well capitalized and better positioned to weather the downturn goods require chemicals. Metals & mining is also facing a 2022, the performance of consumer staples was resilient. as regulatory requirements and healthy balance sheets period of soft demand, as housing and infrastructure The uptick in yields was not reflected in the price, which is a provide a cushion to absorb any potential losses. Fundamen- spending plans are being cut back, while margins are being key risk, alongside a potential growth rebound (in which the tals look appealing as valuations are cheap and the earnings squeezed by higher average energy costs. Hence, the sector defensive consumer staples sector is expected to lag broader picture has started to improve thanks to the positive impact is expected to face the sharpest earnings contraction in 2023, equity markets). However, as growth concerns are likely to from higher rates. Barring a significant downturn, we expect forcing companies to cut back on capex plans and operations remain elevated, we could see continued market consolida- the sector to do well in 2023. and to reduce dividends. tion where defensive sectors could hold up better.

Main asset classes Equities 38 | 39 Regional outlook Eastern Europe, Middle USA UK Asia East and Africa Solid earnings picture, but relatively elevated valuation Favorable valuation, lackluster growth Recovery remains elusive US equities saw a sharp de-rating in 2022 as the Fed The UK outperformed global equities in 2022 (in local Asian equities (excluding Japan) have been under pressure in Clear bright spot within the region increased its policy rate significantly. In particular, the currency terms), driven by stronger earnings growth thanks to 2022 as China’s zero COVID-19 policy, slowing global growth We expect Eastern Europe, Middle East and Africa (EEMEA) technology sector, which the USA has substantial exposure to, the market’s sector composition (higher energy and defensive and USD strength weighed on regional earnings. We believe markets to perform in line with the benchmark MSCI came under strong pressure in 2022. However, while the US exposure). UK equities also benefited significantly from the 2023 is likely to be another challenging year for the region, Emerging Markets Index in 2023, with a preference for equity market offers a relatively stable earnings picture, it still GBP’s depreciation in 2022, given that UK equities earn as tightening monetary conditions are expected to slow Asian Middle East/Gulf Cooperation Council (GCC) markets within trades at a premium to the rest of the world. Growth is most of their revenue from international markets. Looking economies, leading to meager earnings growth. Though the region. EEMEA as a region has undergone significant expected to slow, but the economic outlook is still better than forward, the UK is still trading at a meaningfully attractive valuations are at reasonable levels and foreign positioning upheaval in 2022 given the geopolitical shocks and soaring for Europe as the USA is less dependent on energy imports. valuation level and has one of the highest dividend yields remains light, the region lacks a catalyst for a strong recovery. energy prices, leading to varied performance across the We believe that 2023 will be a year of two very different within developed markets. However, a lot of these advantag- We expect the Chinese economy to remain weak, despite regional markets. Eastern European markets, for example, halves for US equities. As long as the Fed keeps its restrictive es are offset by negative earnings growth forecasts for the easing monetary and fiscal conditions, until there is flexibility suffered from the Ukraine war and related energy disruptions, stance and yields remain elevated, US equities will show a next two years. We currently see no catalyst for valuations on the zero COVID-19 policy. Conversely, South Asian which we expect will remain an overhang in 2023. South rather muted performance. Once markets start pricing in a given a pending trade deal with the European Union and markets should benefit from the post-COVID recovery. Africa is expected to deliver returns in line with the benchmark less hawkish Fed, we believe US equities have scope to geopolitical uncertainties. However, on a relative basis, they trade at a significant as the earnings outlook weakened on lower metal prices amid recover. premium, suggesting a large part of the recovery is already global growth concerns. Middle East/GCC markets have priced in. As such, we expect regional equities to perform in displayed impressive resilience and are on track to generate Switzerland line with global peers. Within Asia, we prefer stocks linked to the strongest returns of any region globally for the second Eurozone China’s sustainability drive, as the sector enjoys strong state consecutive year. These returns have been driven by three support and is delivering robust earnings growth. key factors: elevated oil prices, which are expected to Defensive characteristics attractive amid uncertainty generate a cumulative current account surplus in excess of Geopolitical and growth risks cloud the outlook The Swiss equity market is geared toward so-called defensive USD 1 trn over the next three years; robust delivery on Going into 2023, we are cautious on Eurozone equities and sectors, as healthcare and consumer staples account for Latin America economic transformation plans that have allowed the region’s expect regional markets to remain under pressure amid more than 60% of the benchmark index. Hence, Swiss non-oil sector to flourish, especially in Saudi Arabia and the ongoing macro headwinds for the region. Our economists equities tend to outperform when purchasing managers’ UAE; and a steady pipeline of initial public offerings and expect the Eurozone to already be in a recession going into indices decline and vice versa. Swiss equities thus are likely Geographical isolation as a positive loosening of restrictions on foreign ownership limits that have 2023, and geopolitical risks further complicate the outlook for to outperform in a volatile environment with slowing growth, in After a strong performance in 2022, we expect Latin helped increase the GCC’s weight in the MSCI EM bench- the region. Earnings growth for the region is expected to lag our view. In addition, the earnings outlook for Swiss equities American equities to deliver attractive returns in 2023. The mark from 1.4% in 2018 to around 8% at the beginning of the broader MSCI World Index amid a sharp deterioration in is relatively bright, with double-digit earnings growth region should benefit from supply chain reshoring, which Q4 2022. We expect these factors to remain in place over the outlook for consumers and businesses. Any potential expectations for 2023. While a stronger CHF is a risk for the could provide a boost to the economy. Financials (25% of the 2023, albeit with less intensity compared to the preceding peace agreement regarding Ukraine would be a positive export-oriented Swiss market, Swiss companies tend to be MSCI Emerging Markets Latin America Index) should remain two years. Finally, institutional EM investors have low development for the region. quick to adapt to a stronger CHF. well supported by high policy rates. Central banks began exposure to the region, and this should keep foreign inflows hiking rates earlier than their counterparts elsewhere, and we structurally “stickier” over the coming few years. Taking the expect rate cuts could come as early as Q2 2023, which above factors into account, we expect the GCC to remain the Japan could be a positive factor for the market. Valuations are bright spot and deliver significantly more defensive returns attractive and dividend yields remain appealing at around over 2023 than the broader EM universe. 7.8%. We note commodity price developments will likely have Currency is the key a major influence on returns. We expect some volatility as the Japan outperformed other equity markets in 2022 thanks in political transition in Brazil will likely usher in new fiscal rules large part to currency effects. While most central banks and regulations for certain sectors. However, global delivery tightened aggressively, the Bank of Japan stuck with its bottlenecks coupled with elevated average commodity prices dovish positioning, which weighed on the JPY. We believe create an environment from which Latin American equities currency dynamics will remain a dominant factor for Japanese should benefit relative to other EM, in our view. equities in 2023. Fundamentally, while Japanese equities remain cheap, Japan is a very cyclical market and may suffer from the ongoing economic slowdown.

Main asset classes Technical corner 40 | 41 Further weakness ahead for US inflation expectations to Chinese equity markets move lower during 2023 We believe that Chinese equity markets are set to perform poorly into the We believe that US 10-year Breakeven Inflation Expectations (BEIs) are set to first half of 2023, resuming the aggressive downtrend that began in early move lower in 2023, which we believe should eventually cap the upside in 2021. Hong Kong is expected to lead the way, where the Hang Seng Index nominal yields. has established a multi-year top. The MSCI China and the Shenzhen CSI 300 indexes already reached new lows for 2022. This negative outlook is further reinforced by breadth and volume indicators, as well as the weakening of the This outlook is based on the confirmation of a large A major top in US inflation expectations is expected CNY relative to the USD. Importantly, we also see a range of important nega- and significant technical “head and shoulders” top to eventually limit the upside potential for nominal tive sector stories. pattern in 10-year BEIs. Realized inflation readings bond yields going into 2023, although this is only remain high at this point and falling inflation expecta- seen likely to occur once BEIs start to fall in a more tions may be hard to envisage. However, we believe meaningful way and we also see technical evidence that markets are forward looking, and that this major that 10-year US real yields may have peaked, in the top is signaling that the market is pricing in a higher view of our technical analysts. The market that continues to give us the most For the Shenzhen CSI 300 Index, the beginning of chance of a recession during 2023, which would in concern is Hong Kong, where the Hang Seng Index 2022 saw a large and important “head & shoulders” turn bring inflation sharply lower. With all this in Finally, we note that high and rising inflation has has removed pivotal long-term support seen from top established to mark, in the view of our technical mind, the market is holding initial support seen at the resulted in weak performance across most traditional the YTD low and 2016 lows at 18279/235. This analysts, a long-term change of trend lower, with the 38.2% retracement of the 2020/22 up move at asset classes in 2022, with bonds and equities has established a multi-year top to warn of a market falling sharply until the end of April. While we 208 bp, however we look for a break below here in remaining unusually well correlated as both suffered long-term change of trend lower with some signifi- continue to see scope for further consolidation at our due course, with the next supports seen at 200 bp, large drawdowns. We believe a fall in inflation cant fresh declines already seen in October. This next objective/support at 3503 – the key low of then 182/177 bp, with the measured top objective expectations is likely to help restore a more normal recent weakness has left Chinese equities highly 2020 – we see no technical reason not to look for a below here at 150/146.5 bp. With realized inflation negative bond/equity correlation in 2023, which oversold and we see scope for a consolidation break in due course, with support then seen next at still high, we do not expect this level to be reached should trigger a large top in the US equity/bond phase toward year end to unwind this overstretched the 61.8% Fibonacci retracement of the entire uptrend quickly. Key resistance is seen at 258 bp. ratio, resulting in a large underperformance of condition. With major tops seen in place, though, from the 2008 lows at 3259, then the long-term equities over the next 3–6 months. this will be seen only as a temporary pause ahead of uptrend from the 2008 lows, currently at 3155. an eventual resumption of the core downtrend back to 14560 and eventually our objective at the 61.8% A further recent negative factor for Chinese equities retracement of the rise from 1974 at 12885. has been the sharp weakening of CNY/CNH relative to the USD, as we typically see these The recovery seen in the MSCI China Index post the periods as a headwind for the equity market. We March low earlier this year was capped ahead of its view the current weakness as corrective, and we falling 200-day average, and downside pressures continue to look for USD/CNY to rise further over quickly resurfaced in October, with the index moving the next 3–6 months, with next resistance seen at below its March low potential neckline to a multi- 7.42/745, which is a long term 61.8% Fibonacci year top from October 2011 for a brief move below retracement level, then 7.780. the 2016 low at 47.99. With the decline already leaving the market highly oversold, we similarly see scope for a fresh consolidation phase. Should 47.99 be removed, this would be seen confirming a multi-year top and an even more significant change of trend lower, with support then seen next and initially at the 44.48 low of 2011.

Main asset classes Currencies 42 | 43 Eurozone-wide debt issuance discussions to stem a CNY weakness should persist potential weakening of the EUR, thereby requiring a The Asia FX complex is likely to remain weak in the Monetary policy, growth dynamic management of EUR positions. first part of 2023 given the resilient USD trend. Some divergence across the region can be expected, EM hampered by lower carry, growth risks depending on the various economies’ dependence In 2022, EM currencies held up well against most on manufacturing exports, which are likely to be likely to drive FX developed market (DM) currencies. However, the more impacted by the slowdown in global demand outlook for EM currencies versus the USD continues than commodities and services. This is one key to be challenging despite already cheap valuations. reason why the CNY is likely to weaken. The other In early 2023, the ongoing tightening of global is that imports are likely to accelerate as expansion- financial conditions and a hawkish Fed should ary fiscal and monetary policy starts to feed through continue to support the USD. In the second part of into the real economy in the months to come. We expect the USD to remain overvalued in 2023. A turning point in the USD’s 2023, the USD could lose some of its strength. Further out, the relaxation of COVID-19 restrictions strength remains largely conditional on a shift in US monetary policy and That said, recessionary risks could still cloud the is likely to reignite tourism outflows and bring the environment for EM currencies even though eco- current account surplus down from 2% of gross improving global growth prospects. The significant undervaluation of the JPY nomic activity in EM is expected to hold up some- domestic product currently toward the 0.5% pre- should reverse but will ultimately require the Bank of Japan (BoJ) to abandon what better than in the USA. Some EM central COVID level. With the CNY still 3%-4% above banks are expected to loosen monetary policy ahead pre-COVID highs in trade-weighted terms, we its yield curve control policy. Emerging market (EM) currencies should of the Fed. This could further diminish the carry expect Chinese authorities to be more than comfort- remain soft in general. Finally, active foreign exchange (FX) management will buffer and also the risk-adjusted carry in light of able with a meaningful CNY depreciation. Within the high volatility. A challenging environment for com- region, the IDR should prove more resilient in 2023, be of the essence in a world of heightened volatility and rapid shifts in the modity prices would be favorable for the inflation pic- due to its trade surplus and attractive carry against forces driving FX. ture in EM, but would lead to a further deterioration the USD, which is among the highest in the region. in the terms of trade, which were a key supportive factor for EM FX in the first half of 2022. Within the EM FX space, we are especially cautious on currencies with a larger exposure to DM recession The USD Index (DXY) is on track for one of its best tion to stem the depreciation of the currency. For risks, as well as geopolitical tensions and the annual performances in decades in 2022. We think the first time since 2014, Japan has witnessed slowdown in China. In this context, Eastern this unusual strength, which has created a substan- mounting inflationary pressures, and the JPY’s European currencies such as the PLN look particu- tial overvaluation of the DXY, is justified. The US sharp depreciation in 2022 might add to imported larly vulnerable given the country’s strong trade ties economy has been strong, resulting in a tight labor price inflation. The eventual abandoning of the YCC with the Eurozone countries and geographical market. With underlying inflation substantially more policy by the BoJ in 2023 is a key risk. As the Fed proximity to the Ukraine war. elevated than the US Federal Reserve’s inflation will likely pivot to a less hawkish stance sometime i target, the Fed initiated the fastest policy tightening n 2023, we think this combination would mark an in decades. This generated a major source of USD end to the sharp JPY depreciation and a potential support through increased carry attractiveness. significant reversal of our estimated 40% under- Furthermore, the USD’s safe-haven characteristics valuation in JPY vis à vis the USD. proved attractive at a time of deteriorating risk sentiment globally. Both these factors will likely Active and flexible FX strategy remain in place going into 2023, and we expect the FX volatility surged in 2022, virtually doubling from USD to remain largely overvalued throughout 2023. the level at the beginning of the year. While we do A turning point in the USD might come later in 2023. not anticipate a similar gain in volatility in 2023, we A dovish Fed pivot together with an improving global expect it will remain historically elevated. The economic outlook would be needed for the USD to uncertain pace of the global growth slowdown (or give back its gains. recession in some countries), combined with the volatile inflation normalization and persistent geopo- JPY depreciation likely to turn in time litical uncertainties, is setting the scene for another Among G10 currencies, the JPY has been most year of potentially large market swings. For this impacted by the ever increasing rates differentials in reason, we believe that active and flexible FX 2022. The Bank of Japan (BoJ) is expected to hold management is a crucial strategy for investors. For on to its yield curve control (YCC) policy until at least example, resurfacing peripheral risks in the March 2023. As such, pressure on the JPY will Eurozone could force the European Central Bank likely remain substantial despite recent FX interven- to intervene, or result in a further push for renewed

Main asset classes Currencies Main asset classes Real estate 44 | 45 Implied policy rates in selected DM and EM economies In basis points Stay selective – 200 –100 0 100 200 Malaysia China We expect the environment for real estate to become more challenging in 2023 as the asset class faces headwinds due to higher interest rates and Asia India weaker economic growth. We favor listed over direct real estate and still prefer aiwan sectors with strong secular demand drivers. T Thailand Return prospects for global property markets are growth and lower inflationary pressures support Emerging markets Poland challenged by both higher interest rates and weaker Swiss listed real estate. We particularly like Swiss economic growth, but remain partially supported by real estate funds, as they should benefit from a EMEA an embedded inflation link through contractual rents. positive outlook for residential property markets at South Africa Higher interest rates increase the cost of financing undemanding valuations as premia to net asset and negatively impact property valuations via higher values (NAVs) have decreased to levels last seen Brazil discount rates, while weaker economic activity during the Global Financial Crisis. weighs on tenant demand for space, especially in LatAm more cyclical segments such as office and retail. On Direct real estate: Focus on rental growth Mexico a positive note, rents can be indexed to inflation or With valuations likely to come under pressure in increased by a fixed amount during the lease term, 2023, we expect investors to be more cautious providing a partial hedge against elevated inflation. when it comes to new acquisitions. In fact, Canada While listed real estate declined in the first nine prime-property yields are expected to rise by an months of 2022, direct real estate valuations proved average of 100 bp, while property values should fall Japan resilient. Indeed, we believe they have yet to reflect between 15% and 20% across all sectors by the the headwinds the sector faces. end of 2023, according to Property Market Analysis. We therefore believe that valuations should start Switzerland Listed real estate: Prefer the USA and Switzer- looking more attractive, potentially leading to land over the Eurozone and UK investment opportunities in 2024. Having said that, Valuations in listed real estate markets – at least we expect less pronounced declines in segments USA partially – reflect the challenging outlook for property with positive rental growth, such as residential or markets as multiples have fallen in 2022 and are logistics, due to favorable supply-demand dynamics. Australia now closer to their long-term average values. Logistics assets should continue to benefit from the Regionally, we expect US real estate to benefit from growing penetration of e-commerce, larger inventory Developed markets lower but still positive economic growth in 2023, as holdings as well as onshoring efforts, supporting Eurozone well as a higher exposure to sectors underpinned by demand even in an economic slowdown. Within the strong structural growth such as logistics, self-stor- office segment, we believe that higher propensity to age and data centers. In contrast, Eurozone listed work from home will remain a challenge, and New Zealand real estate is trading at a significant discount to net therefore expect higher quality assets that also asset values (NAVs) of over 50% but we expect score relatively better with respect to environmental, UK headwinds to remain considerable, especially in the social and governance (ESG) criteria to perform best. first half of 2023 as interest rates rise further while the economy weakens. The same applies to UK Hikes priced in 3M Hikes priced in 6M Hikes priced in 1Y Cumulative hikes priced in 1Y listed real estate, while more resilient economic Note Market-implied rate hikes over the next 12 months are displayed on the right and cuts on the left. The + sign depicts where markets expect rates to be in 12 months compared to today’s levels, i.e. market-implied rate hikes and cuts within the next 12 months on a net (i.e. cumulative) basis. Last data point 10/11/2022 Source Bloomberg, Credit Suisse

Main asset classes Hedge funds 46 | 47 Improving return prospects In 2023, hedge funds will likely deliver a better performance relative to tradi- tional asset classes than in the past. Selectivity is key, and we highlight market neutral, relative value multi-strategy and private yield alternatives as potential alternative return solutions within traditional portfolios. In 2022, hedge funds (HFs), and low-beta strate- Additionally, higher interest rates and a lackluster gies in particular, delivered the largest outperfor- growth environment should result in a higher return mance compared to global equities and bonds since potential from alternative return factors, such as the inception of HF indices in the 1990s. In an carry and mean-reversion, benefiting multi-strategy environment of higher interest rates and volatility, relative value strategies. A high-inflation environment slowing economic growth and still elevated inflation, is also supportive of yield alternative strategies such we expect hedge fund excess returns vs. traditional as private credit and infrastructure. Key areas in equities and bonds to remain higher compared to focus are assets such as clean energy and transpor- the past decade, with improving return potential tation, which benefit from higher fiscal spending on from active management and alternative return energy-transition efforts. However, large differences factors. between the best and worst performers underscore the importance of selection and due diligence. Strategies benefiting from Hedge funds outperform in tough environments rising rates and inflation Risk-adjusted performance of different asset classes during strong/weak purchasing managers indices (PMIs): Since 2000 HF managers should be able to capitalize on the large performance dispersion between companies arising from their sensitivity to inflation, pricing 1.2 power and financial leverage. Market neutral strategies are likely to provide an asymmetric return profile, with greater upside potential and limited downside in fundamentally stronger companies. 0.8 0.4 0.0 PMI above average PMI below average Equities Bonds Broad hedge funds Low-beta hedge funds Last data point 10/2022 Source Bloomberg, Credit Suisse

Main asset classes Private markets Shifting opportunities As growth slows and interest rates rise, asset prices are likely to remain under pressure. Private markets should see more moderate declines than public markets, while lower asset prices will likely present opportunities for fresh investments. A highly selective approach is key. Slowing economic growth and rising interest rates Co-investments: are putting asset valuations under pressure – a Tailored approach with lower fees situation to which private equity (PE) is not immune. For more seasoned and risk tolerant investors, we For already invested private capital, we expect highlight co-investments. Co-investors take minority further broad-based declines, though less substan- stakes alongside the manager and actively under- tial than in public markets. For fresh investments take the deal selection and portfolio construction and funds in the investment phase, the de-rating of process. This offers a more tailored, highly selective equities and volatility in capital markets will likely and proactive approach with significantly lower fees translate into better investment opportunities. and expenses. An investor can target a region, Additionally, record levels of committed but uninvest- industry or manager, while also matching the pace of ed capital (i.e., “dry powder”) provide capacity and commitments with their cash flow needs. Due to flexibility to invest at improved valuations. It is worth lower fees and expenses, such investments – when noting that vintages (i.e., capital) deployed at lower successful – outperform private markets consistently. points in the business cycle tend to perform better That said, the volatility and drawdowns associated than those deployed at higher points. with co-investments are higher than in private markets, but still lower than in public markets. Secondaries and private debt: Improved return prospects Stay selective and well diversified In light of elevated volatility and more attractive asset Recent turbulent years have taught us that diversifi- pricing, we highlight active vehicles that specialize in cation, differentiation and specialized expertise are acquiring companies at lower entry points – second- essential. Private market investing is grounded upon ary managers. Such funds offer diversification with knowledge, skills and a hands-on entrepreneurial more than 200 positions, pricing visibility (given that approach, with returns reliant on the specific their portfolios are well-funded) and lower loss ratios. manager’s ability to skillfully navigate an investment Larger discounts to net asset values (NAVs) this to a successful outcome regardless of the prevailing year are also supportive. Private debt (PD) offers capital market conditions. In our view, continuous another solution, as rising benchmark rates and risk allocation to well-selected, experienced managers premiums improve its future return potential, particu- across sectors, geographies and vintages forms the larly given its floating rate nature. However, higher basis of a resilient portfolio. returns are somewhat offset by higher default rates in a weak macro environment. We thus highlight direct lending – its more resilient component – due to its seniority in terms of the capital structure, lower defaults and typically better recovery rates.

Main asset classes Commodities 50 | 51 demand subdued, as liquefied natural gas (LNG) compromises to hold additional supply auctions in availability as well as other efficiency-enhancing the near term, which caused carbon prices to pull Accelerating the transition measures are still not sufficient to fully replace back in H2 2022. At the same time, the ongoing pre-war volumes from Russia. However, the current industrial recession in Europe is reducing demand acute pressure should help accelerate Europe’s for emission certificates, offsetting the increased energy transition amid faster capital deployment and carbon intensity of power generation as coal plants reduced bureaucracy. For the benefits of this have been re-activated and gas use is maximized. It transition to come to fruition, Europe must ensure is important to note that no new supply has been The backdrop for cyclical commodities is likely to stay challenging and unity and set incentives to ensure private participation. created in this process but simply borrowed from the volatile, an environment that favors active solutions over passive benchmark s. future. Hence, we would see pullbacks in European Carbon price dips present long-term opportunity Union emission allowance prices as an opportunity Intense pressures (e.g., supply and price) within energy markets will Carbon prices are a key tool in tackling climate to build long-term exposure since carbon prices help accelerate the energy transition, while pullbacks in carbon prices could change. Recent reforms to the European Union’s must still rise substantially in order to provide Emissions Trading System scheme ensured the incentives to retire coal plants, and for industrial present longer-term opportunities. Gold upside optionality could be intended functioning of this market by addressing processes to switch from gray to green hydrogen considered, too. oversupply issues. However, increased carbon costs eventually. for industries added to the cost burden caused by Europe’s energy woes. Policymakers came up with Commodities had a turbulent 2022. Physical agricultural goods also tends to be less elastic than markets started the year already tightly supplied, but for hard commodities. As we enter 2023, the the Ukraine war and its impact on supply chains backdrop might still be unfavorable for cyclical added further pressure and caused prices to spike. markets. However, central bank tightening efforts are While prices have forced some demand response in likely to be advanced and peak hawkishness may be the meantime, supply buffers remain low and near, which would provide an improving backdrop for disruption risks elevated. That said, macro head- precious metals, especially gold. As central banks winds have been building, as high prices and risk causing a deep growth slump, we see some aggressive central bank tightening have started to upside risks to gold as we progress in time. It may be curb consumption, which may cause sub-trend premature to build outright exposure, but we see Pullbacks are opportunities growth in 2023. As a result, pressures on invento- merit in looking for medium-term upside optionality. European Union emission allowance prices, EUR/ton ries are likely to ease – barring further unexpected geopolitical events. As inventories normalize, Energy transition set to accelerate extreme backwardations in commodity forward Energy markets have been in the eye of a storm on 100 100 100 curves – a sign of physical shortages – have scope several fronts. Chronic underinvestment and several to flatten. From an investor perspective, this favors supply shocks (e.g., Russian gas export cuts, lack of 90 active and/or systematic solutions over passive contributions from renewables, unexpected nuclear 80 80 benchmarks since curve management is important in outages) triggered a power crisis and a recession in 80 the current phase to generate excess returns. the Eurozone. Households also face high energy bills. That said, price signals proved effective in 70 Backdrop for gold set to improve forcing adjustments, i.e., curbing demand. Refilling 60 60 Commodities are cyclical assets to varying degrees gas storage ahead of winter 2023/2024 will be the 60 across sub-sectors. Base metals and energy are next major challenge in case Russian flows fail to most sensitive to the business cycle, while precious normalize, which we do not assume. In other words, 50 40 metals are considered more defensive. Demand for prices need to stay historically high in order to keep 40 40 30 20 20 20 0 0 Nov 17 Nov 18 Nov 19 Nov 20 Nov 21 Nov 22 EUA front-month future EEX EUA Spot Auction Price Last data point 11/11/2022 Source Bloomberg, Credit Suisse

Supertrends Diversify your risks 52 | 53 Trends with staying power Our Millennials’ values Supertrend is set to benefit For investors with a multi-year horizon who want to from long-term demographic patterns, as the young Supertrends – Diversify add equities to optimize their strategic asset alloca- cohort in Asia in particular will dominate consump- tion, we believe that selectively adding Supertrends tion and drive digital trends like social media, with a growth style makes sense due to current streaming, online shopping and fintech. Importantly, valuations. Our Technology Supertrend should get a this generation has a long-term focus on the world your risks boost from the metaverse, as companies increas- of tomorrow, supporting biodiversity, the circular ingly invest in advanced IT infrastructure, higher economy and health and nutrition. processing power, collaboration tools and newer digital payment methods. Artificial intelligence We also believe that the Infrastructure Supertrend adoption should continue to expand as digitalization remains well positioned for the long term with a accelerates and the number of Internet of Things global commitment by political leaders to accelerate Geopolitical tensions, subdued economic growth and rising interest rates devices surges, paving the way for automation, infrastructure investments. That said, higher interest are all weighing on equity investors’ sentiment for the time being. In the long virtual and augmented reality as well as healthcare rates might slow down large-scale investments in technology, which are all part of our Technology the short run due to the sector’s capital-intensive term, however, we believe that a diversified thematic investment covering Supertrend. commitments. multi-year societal trends should outperform global equities. The Supertrends are here to stay. In 2022, investors had to contend with volatile which should benefit from the (higher) interest rate financial markets and a bear market, interspersed by environment, along with selected consumer names. small rallies, as was the case over the summer. Within our Anxious societies Supertrend, geopolitical green raw Companies and consumers are currently grappling tensions put the Personal security subtheme back materials with the highest inflation in decades, which is into focus, while the Affordability subtheme high- persisting longer than many observers (ourselves lights a key issue due to the spike in energy and included) anticipated. As such, investors have food prices. The Employment subtheme within cleaner design/ started to rotate away from growth stocks into value Anxious societies is currently dominated by the lack production stocks. For example, the energy sector is benefitting of available labor and the difficulties that companies from higher oil and natural gas prices as a result of face in recruiting good employees, but an economic the Ukraine war. Our strong diversification approach slowdown could alleviate that problem. Last but not across the 23 subthemes of the Supertrends is least, we see the current energy crisis in Europe as Circular helpful in navigating turbulent markets such as another trigger point for climate change-related these, providing exposure to many different indus- debates, though one needs to distinguish between tries and trends. key energy topics (i.e., electricity generation and the recycle transition away from fossil fuels) and long-term economy On the defensive growth themes in an early cycle stage (i.e., hydro- We believe that our more defensive Supertrends, gen, precision agriculture and cultivated meat such as the Silver economy and selected subthemes processing), as the latter may see a delay in some within Infrastructure and Climate change, as well as investments in the short term. the long-term demographic trends within Silver economy, should prove less volatile in the months ahead than the growth-oriented themes captured in the Millennials’ values and Technology Supertrends. The Silver economy Supertrend focuses on health- care companies that should benefit from rising better service demand and strong earnings growth as societies age. Therapeutic areas of particular importance re-use/ include cardiovascular disease, oncology and repair neurology. Beyond the healthcare sector, Silver economy also has exposure to insurance companies, Find out more Find out more about Supertrends

Special topic The energy system 54 | 55 Out with the old, in with the new Developing a more secure Change in European Union electricity generation between 2019 and 2021 (in TWh) and cleaner energy system – 25 – 20 –15 –10 – 5 0 5 10 15 20 25 Greece Other EU Amid geopolitical tensions, energy security will continue to dominate gov- Poland ernment agendas in 2023. Given the level and volatility of fossil fuel prices and the competitiveness of cheap renewable energy sources, it is unlikely Romania that the European Union will ever depend on external supplies to the same extent that it did prior to the Ukraine war, when it imported 90% of its gas. Czechia The search for a more secure energy system – in Europe and elsewhere in Bulgaria the world – entails a combination of measures, though we expect that re- newables will be the biggest beneficiary. Denmark Sweden Geopolitics is not the only catalyst for this transition. (e.g., up to 20 – 25 billion cubic meters) from Finland The threat of climate change continues unabated. floating units could become operational by the end During the summer of 2022, the concentration of of 2023. In addition, overextending gas capacity is carbon dioxide (CO2) in the atmosphere went above not consistent with climate goals, as gas is associated Portugal 420 parts per million (ppm) for the first time. At the with substantial emissions along the supply chain. current pace, the global average CO concentration The climate commitments of developed nations will 2 Ireland could reach 440 ppm before 2030, which would make the share of gas-fired power increasingly hinder the chances of limiting global warming to marginal. The growing economic and security 1.5°C compared with pre-industrial times. benefits of electrification will also contribute to Belgium displacing gas in other sectors, such as residential Does gas infrastructure hold the solution? heating (e.g., via more efficient heat pumps). Thus, Dependence on fossil fuels has often been at the from a sustainability, security and economic perspec- Italy root of geopolitical instabilities, exacerbating conflicts tive, investments in new gas infrastructure could and destabilizing economies through price shocks. eventually be subject to devaluation over the long Looking to 2023, persistently high energy prices term. Germany would increase the risk of a global recession. Through this lens, one solution – expanding liquefied France natural gas (LNG) capacity – may struggle to solve all energy security concerns. For example, Germany plans to build LNG capacity above 60 billion cubic Spain meters/year by 2026, but only a minor share Netherlands Coal Renewables Gas Nuclear Other fossil fuels Source Ember, European Electricity Review 2022

Special topic The energy system 56 | 57 Renewables roll-out potentially more than 50%, which would be more Banking on nature In contrast, renewables deliver sustainable, readily than twice that of other sources such as solar. Estimated yearly solar and wind global additions to align to low-carbon scenarios (in GW) available, domestic and economically competitive Finally, offshore wind is already economically energy generation. Even before the surge in fuel competitive. For example, it offered the lowest 2 prices, estimates of lifecycle costs were already power price at a recent large auction in the UK. signaling solar and wind energy as preferable to Thus, we expect this technology to experience other sources of electricity. In addition, we can exponential growth in the future. expect the yield of existing renewables to improve over their lifetime, as storage solutions such as ...but solar (and storage) not far behind grid-scale batteries become more common. Solar power represented only 3.6% of the global 3 electricity mix in 2021. However, solar photovoltaic To meet the Paris Agreement, we estimate that (PV) is forecast to lead global renewable capacity 4 cumulative wind and solar capacity needs to grow additions in 2022 and 2023. Solar projects will be 3.5× vs. 2021 levels by 2030. For solar panels increasingly paired with battery storage in the future, alone, BloombergNEF estimates that existing and as the technology evolves and costs decline. In planned manufacturing capacity will be sufficient to markets such as California, over 95% of solar 1 build 940 gigawatt of panels every year by 2025. assets in the grid connection queue are already 5 We also believe that nuclear power has a role to play. paired with energy storage. This allows developers While several factors are slowing its rollout, nuclear and grid operators to better manage the variability of energy has the potential to complement the produc- renewables, and it provides a concrete alternative to 6 tion of low-carbon electricity where renewable costly and polluting natural gas-peaker plants. resources are limited. 226 ≥ 470 2021 additions Average yearly additions 2022–2030 Offshore wind the one to watch… The development of floating wind technologies Source IRENA (December 2021); Country data; Credit Suisse estimates makes it possible to explore new markets and geographies where bottom-fixed foundations are impractical. Offshore wind offers a remarkable capacity factor (ratio of actual energy output over a Wind picking up given period to the maximum possible output) of Estimated potential offshore wind capacity by 2030 (in GW) 56 Global capacity in 2021 ≥ 375 Estimated global capacity by 2030 Find out more Source IRENA (December 2021); Country data; Credit Suisse estimates

Forecasts

Forecasts 60 | 61 2023 in numbers Financial market performance/forecasts 2022 YTD 2022 YTD performance on 2023 expected performance on 2023 expected Equities* 10 November 2022 total returns Credit 10 November 2022 total returns US equities –17.1% 2.0% Global investment grade –15.6% 4.6% We foresee sub-potential growth (1.6%) globally, which will likely lead to bonds** EMU equities –10.8% – 2.0% higher unemployment rates. Inflation will remain more elevated than in the Global high yield bonds** –13.4% 5.1% Swiss equities –13.0% 5.0% pre-pandemic years, but lower than in 2022. Emerging market HC bonds*** – 21.2% 7.6% UK equities 5.7% 3.0% Japanese equities –1.3% 1.5% Emerging market equities –19.7% 1.0% Forecasts for growth and inflation Close on End-2023 Currencies & Close on End-2023 Real GDP (y/y %) Inflation (annual avg. y/y %) Bond yields 10 November 2022 forecast commodities 10 November 2022 forecast 2021 2022E* 2023E* 2021 2022E* 2023E* 10-year US Treasury yield 3.81% 4.10% EUR/USD 1.02 1.02 Global 5.9 2.7 1.6 Global 3.5 7.6 5.0 10-year German Bund yield 2.01% 2.80% USD/CHF 0.96 0.95 United States 5.7 1.6 0.8 United States 4.7 7.9 3.8 10-year Swiss Eidgenossen 1.07% 1.40% EUR/CHF 0.98 0.97 Canada 4.4 3.4 1.0 Canada 3.4 6.9 3.8 yield USD/JPY 141.00 135.00 Eurozone 5.3 3.2 – 0.2 Eurozone 2.6 8.6 6.0 GBP/USD 1.17 1.14 Germany 2.9 1.7 – 0.8 Germany 3.2 8.5 6.4 USD/CNY 7.19 7.30 Italy 6.6 3.7 – 0.2 Italy 1.9 8.2 6.0 Gold (USD/oz) 1755.00 1750.00 France 6.8 2.5 0.2 France 2.1 6.0 4.8 WTI (USD/bbl) 86.00 80.00 Spain 5.1 4.6 0.8 Spain 2.9 9.0 4.6 United Kingdom 7.4 4.2 – 0.4 United Kingdom 2.6 9.0 6.6 Switzerland 4.2 2.2 1.0 Switzerland 0.6 2.9 1.5 Japan 1.7 1.0 0.5 Japan – 0.2 2.2 1.7 Australia 4.7 4.0 1.6 Australia 2.8 6.6 5.2 China 8.1 3.3 4.5 China 0.9 2.2 2.0 India (fiscal year) 8.3 7.1 5.8 India (fiscal year) 5.1 6.8 5.1 * P erformance and expected returns are total return including dividends. Markets refer to MSCI country / regional indices in local currency. Performance of the periods. 10/11/2017–10/11/2022 for those indices in chronological order are: MSCI USA: 9.5%, 13.6%, 18.6%, 33.5%, Brazil 4.6 2.9 0.9 Brazil 8.3 9.3 5.0 –15.4%. MSCI EMU: – 5.9%, 15.4%, – 3.5%, 29.2%, –11.4%. MSCI Switzerland: 2.9%, 17.9%, 2.7%, 23.9%, –10.1%. MSCI UK: – 0.3%, 7.8%, –13.1%, 21.3%, 7.0%. MSCI Japan: – 4.6%, 5.8%, 2.9%, 22.3%, –1.5%. MSCI EM: – 7.9%, 12.6%, 15.0%, 11.0%, – 21.7%. Russia 4.7 – 4.0 – 2.5 Russia 6.7 14.2 4.5 ** Barclays Global Investment Grade Corporate and Global High Y ield index * E: estimate *** JP Morgan EMBIG Div. (sovereign index) Note: Historical and/or projected performance indications and financial market scenarios are not reliable indicators of current or future performance. Note Historical and/or projected performance indications and financial market scenarios are not reliable indicators of current or future performance. Last data point 10/11/2022 Source Thomson Reuters Datastream, Haver Analytics, Credit Suisse Last data point 10/11/2022 Source Bloomberg, Datastream, Credit Suisse

Disclaimer Important information 62 | 63 Risk Warning recommendations by CS Research. For equities, this relates to the respective Company Note or Investors, as defined by the CBB, and are not intended for any other persons. The Central Bank of C. Suisse Asesoría and/or Banco CS. This document is distributed for informational purposes only Every investment involves risk, especially with regard to fluctuations in value and return. If an Company Summary of the issuer. Recommendations for bonds can be found within the respective Bahrain has not reviewed, nor has it approved, this document or the marketing of any investment and is not a substitute for the Operations Reports and/or Account Statements you receive from C. investment is denominated in a currency other than your base currency, changes in the rate of Research Alert (bonds) publication or Institutional Research Flash/Alert– Credit Update Switzerland. vehicle referred to herein in the Kingdom of Bahrain and is not responsible for the performance of Suisse Asesoría and/or Banco CS in terms of the General Provisions Applicable to Financial exchange may have an adverse effect on value, price or income. These items are available on request or via online banking. any such investment vehicle. Credit Suisse AG, Bahrain Branch is located at Level 21, East Tower, Institutions and other Legal Entities that Provide Investment Services issued by the Mexican This document may include information on investments that involve special risks. You should seek Bahrain World Trade Centre, Manama, Kingdom of Bahrain. Brazil: This report is distributed in Brazil Banking and Securities Commission (“CNBV”). Given the nature of this document, C. Suisse the advice of your independent financial advisor prior to taking any investment decisions based on Disclosures are available from: by Credit Suisse (Brasil) S.A. Corretora de Títulos e Valores Mobiliários or its affiliates. Chile: This Asesoría and/or Banco CS does not assume any responsibility derived from the information this document or for any necessary explanation of its contents. Further information is also available https://www.credit-suisse.com/disclosure report is distributed by Credit Suisse Agencia de Valores (Chile) Limitada, a branch of Credit Suisse contained therein. Without prejudice to the fact that the information was obtained from or based on in the information brochure “Risks Involved in Trading Financial Instruments” available from the AG (incorporated in the Canton of Zurich), regulated by the Chilean Financial Market Commission. sources believed to be reliable by C. Suisse Asesoría and/or Banco CS, there is no guarantee that Swiss Bankers Association. Global disclaimer / Important information Neither the issuer nor the securities have been registered with the Financial Market Commission of the information is either accurate or complete. Banco CS and/or C. Suisse Asesoría does not The information provided herein constitutes marketing material; it is not investment research. This Chile (Comisión para el Mercado Financiero) pursuant to Law no. 18.045, the Ley de Mercado de accept any liability arising from any loss arising from the use of the information contained in the Past performance is not an indicator of future performance. Performance can be affected document is not directed to, or intended for distribution to or use by, any person or entity who is a Valores, and regulations thereunder, so they may not be offered or sold publicly in Chile. This document sent to you. It is recommended that the investor make sure that the information provided by commissions, fees or other charges as well as exchange rate fluctuations. citizen or resident of or located in any locality, state, country or other jurisdiction where such document does not constitute an offer of, or an invitation to subscribe for or purchase, the securities is in accordance to his/her personal circumstances and investment profile, in relation to any distribution, publication, availability or use would be contrary to law or regulation or which would in the Republic of Chile, other than to individually identified investors pursuant to a private offering particular legal, regulatory or fiscal situation, or to obtain independent professional advice. C. Suisse Financial market risks subject CS to any registration or licensing requirement within such jurisdiction. within the meaning of article 4 of the Ley de Mercado de Valores (an offer that is not “addressed to Asesoría México, S.A. de C.V. is an investment adviser created in accordance with the Mexican the public in general or to a certain sector or specific group of the public”). DIFC: This information is Securities Market Law ("LMV"), registered with the CNBV under the folio number 30070. C. Suisse Historical returns and financial market scenarios are no reliable indicators of future performance. References in this report to CS include Credit Suisse AG, the Swiss bank, its subsidiaries and being distributed by Credit Suisse AG (DIFC Branch). Credit Suisse AG (DIFC Branch) is licensed Asesoría México, S.A. de C.V. is not part of Grupo Financiero Credit Suisse (México), S.A. de C.V., The price and value of investments mentioned and any income that might accrue could fall or rise or affiliates. For more information on our structure, please use the following link: and regulated by the Dubai Financial Services Authority (“DFSA”). Related financial services or or any other financial group in Mexico. C. Suisse Asesoría México, S.A. de C.V. is not an fluctuate. You should consult with such advisor(s) as you consider necessary to assist you in making https://www.credit-suisse.com products are only made available to Professional Clients or Market Counterparties, as defined by the independent investment adviser as provided by LMV and other applicable regulations due to its these determinations. DFSA and are not intended for any other persons. Credit Suisse AG (DIFC Branch) is located on direct relationship with Credit Suisse AG, a foreign financial institution, and its indirect relationship Investments may have no public market or only a restricted secondary market. Where a secondary NO DISTRIBUTION, SOLICITATION, OR ADVICE: This document is provided for information and Level 9 East, The Gate Building, DIFC, Dubai, United Arab Emirates. France: This report is with the entities that make up Grupo Financiero Credit Suisse (México), S.A. de C.V. Netherlands: market exists, it is not possible to predict the price at which investments will trade in the market or illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommenda- distributed by Credit Suisse (Luxembourg) S.A. Succursale en France (the “France branch”), which This report is distributed by Credit Suisse (Luxembourg) S.A., Netherlands Branch (the whether such market will be liquid or illiquid. tion to buy or sell any security or other financial instrument. Any information including facts, opinions is a branch of Credit Suisse (Luxembourg) S.A., a duly authorized credit institution in the Grand “Netherlands branch”), which is a branch of Credit Suisse (Luxembourg) S.A., a duly authorized or quotations, may be condensed or summarized and is expressed as of the date of writing. The Duchy of Luxembourg with registered address 5, rue Jean Monnet, L-2180 Luxembourg. The credit institution in the Grand Duchy of Luxembourg with registered address 5, rue Jean Monnet, Emerging markets information contained in this document has been provided as a general market commentary only and France branch is subject to the prudential supervision of the Luxembourg supervisory authority, the L-2180 Luxembourg. The Netherlands branch is subject to the prudential supervision of the Where this document relates to emerging markets, you should be aware that there are uncertainties does not constitute any form of regulated investment research financial advice, legal, tax or other Commission de Surveillance du Secteur Financier (CSSF), and of the French supervisory Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (CSSF), and risks associated with investments and transactions in various types of investments of, or related regulated service. It does not take into account the financial objectives, situation or needs of any authorities, the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and the Autorité des and of the Dutch supervisory authority, De Nederlansche Bank (DNB), and of the Dutch market or linked to, issuers and obligors incorporated, based or principally engaged in business in emerging persons, which are necessary considerations before making any investment decision. You should Marchés Financiers (AMF). Germany: This report is distributed by Credit Suisse (Deutschland) supervisor, the Autoriteit Financiële Markten (AFM). Portugal: This report is distributed by Credit markets countries. Investments related to emerging markets countries may be considered seek the advice of your independent financial advisor prior to taking any investment decisions based Aktiengesellschaft regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin“). Suisse (Luxembourg) S.A., Sucursal em Portugal (the “Portugal branch”), which is a branch of speculative, and their prices will be much more volatile than those in the more developed countries on this document or for any necessary explanation of its contents. This document is intended only to Guernsey: This report is distributed by Credit Suisse AG Guernsey Branch, a branch of Credit Credit Suisse (Luxembourg) S.A., a duly authorized credit institution in the Grand Duchy of of the world. Investments in emerging markets investments should be made only by sophisticated provide observations and views of CS at the date of writing, regardless of the date on which you Suisse AG (incorporated in the Canton of Zurich), with its place of business at Helvetia Court, Les Luxembourg with registered address 5, rue Jean Monnet, L-2180 Luxembourg. The Portugal investors or experienced professionals who have independent knowledge of the relevant markets, receive or access the information. Observations and views contained in this document may be Echelons, South Esplanade, St Peter Port, Guernsey. Credit Suisse AG Guernsey Branch is wholly branch is subject to the prudential supervision of the Luxembourg supervisory authority, the are able to consider and weigh the various risks presented by such investments, and have the different from those expressed by other Departments at CS and may change at any time without owned by Credit Suisse AG and regulated by the Guernsey Financial Services Commission. Copies Commission de Surveillance du Secteur Financier (CSSF), and of the Portuguese supervisory financial resources necessary to bear the substantial risk of loss of investment in such investments. notice and with no obligation to update. CS is under no obligation to ensure that such updates are of the latest audited accounts of Credit Suisse AG are available on request. India: This report is authorities, the Banco de Portugal (BdP) and the Comissão do Mercado dos Valores Mobiliários It is your responsibility to manage the risks which arise as a result of investing in emerging markets brought to your attention. distributed by Credit Suisse Securities (India) Private Limited (CIN no. U67120M- (CMVM). Qatar: This information has been distributed by Credit Suisse (Qatar) L.L.C., which is duly investments and the allocation of assets in your portfolio. You should seek advice from your own H1996PTC104392), regulated by the Securities and Exchange Board of India as Research Analyst authorized and regulated by the Qatar Financial Centre Regulatory Authority (QFCRA) under QFC advisers with regard to the various risks and factors to be considered when investing in an emerging FORECASTS & ESTIMATES: (registration no. INH 000001030), as Portfolio Manager (registration no. INP000002478) and as License No. 00005. All related financial products or services will only be available to Eligible markets investment. Past performance should not be taken as an indication or guarantee of future performance, and no Stock Broker (registration no. INZ000248233), having registered address at 9th Floor, Ceejay Counterparties (as defined by the QFCRA) or Business Customers (as defined by the QFCRA), representation or warranty, express or implied, is made regarding future performance. To the extent House, Dr. Annie Besant Road, Worli, Mumbai – 400 018, India, T- +91-22 6777 3777. Israel: If including individuals, who have opted to be classified as a Business Customer, with net assets in Alternative investments that this report contains statements about future performance, such statements are forward looking distributed by Credit Suisse Financial Services (Israel) Ltd. in Israel: This document is distributed by excess of QR 4 million, and who have sufficient financial knowledge, experience and understanding Hedge funds are not subject to the numerous investor protection regulations that apply to regulated and subject to a number of risks and uncertainties. Unless indicated to the contrary, all figures are Credit Suisse Financial Services (Israel) Ltd. Credit Suisse AG, including the services offered in to participate in such products and/or services. Therefore, this information must not be delivered to, authorized collective investments and hedge fund managers are largely unregulated. Hedge funds unaudited. All valuations mentioned herein are subject to CS valuation policies and procedures. Israel, is not supervised by the Supervisor of Banks at the Bank of Israel, but by the competent or relied on by, any other type of individual. Saudi Arabia: This document is distributed by Credit are not limited to any particular investment discipline or trading strategy, and seek to profit in all banking supervision authority in Switzerland. Credit Suisse Financial Services (Israel) Ltd. is a Suisse Saudi Arabia (CR Number 1010228645), duly licensed and regulated by the Saudi Arabian kinds of markets by using leverage, derivatives, and complex speculative investment strategies that CONFLICTS: licensed investment marketer in Israel and thus, its investment marketing activities are supervised by Capital Market Authority pursuant to License Number 08104-37 dated 23/03/1429H may increase the risk of investment loss. CS reserves the right to remedy any errors that may be present in this report. CS, its affiliates and/ the Israel Securities Authority. Italy: This report is distributed in Italy by Credit Suisse (Italy) S.p.A., corresponding to 21/03/2008AD. Credit Suisse Saudi Arabia’s principal place of business is at Commodity transactions carry a high degree of risk, including the loss of the entire investment, and or their employees may have a position or holding, or other material interest or effect transactions in a bank incorporated and registered under Italian law subject to the supervision and control of Banca King Fahad Road, Hay Al Mhamadiya, 12361- 6858 Riyadh, Saudi Arabia. Website: https://www. may not be suitable for many private investors. The performance of such investments depends on any securities mentioned or options thereon, or other investments related thereto and from time to d’Italia and CONSOB. Lebanon: This report is distributed by Credit Suisse (Lebanon) Finance SAL credit-suisse.com/sa. unpredictable factors such as natural catastrophes, climate influences, hauling capacities, political time may add to or dispose of such investments. CS may be providing, or have provided within the (“CSLF”), a financial institution incorporated in Lebanon and regulated by the Central Bank of Under the Rules on the Offer of Securities and Continuing Obligations, this document may not be unrest, seasonal fluctuations and strong influences of rolling-forward, particularly in futures and previous 12 months, significant advice or investment services in relation to the investments listed in Lebanon (“CBL”) and having a financial institution license number 42. Credit Suisse (Lebanon) distributed in the Kingdom except to such persons as are permitted under the Rules on the Offer of indices. this report or a related investment to any company or issuer mentioned. Some investments referred Finance SAL is subject to the CBL’s laws and circulars as well as the laws and regulations of the Securities and Continuing Obligations issued by the Capital Market Authority. The Capital Market Investors in real estate are exposed to liquidity, foreign currency and other risks, including cyclical to in this report will be offered by a single entity or an associate of CS or CS may be the only market Capital Markets Authority of Lebanon (“CMA”). CSLF is a subsidiary of Credit Suisse AG and part of Authority does not make any representation as to the accuracy or completeness of this document, risk, rental and local market risk as well as environmental risk, and changes to the legal situation. maker in such investments. CS is involved in many businesses that relate to companies mentioned the Credit Suisse Group (CS). The CMA does not accept any responsibility for the content of the and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance in this report. These businesses include specialized trading, risk arbitrage, market making, and other information included in this report, including the accuracy or completeness of such information. The upon, any part of this document. Prospective purchasers of the securities offered hereby should Private Equity proprietary trading. TAX: Nothing in this report constitutes investment, legal, accounting or tax liability for the content of this report lies with the issuer, its directors and other persons, such as conduct their own due diligence on the accuracy of the information relating to the securities. If you Private Equity (hereafter “PE”) means private equity capital investment in companies that are not advice. CS does not advise on the tax consequences of investments and you are advised to contact experts, whose opinions are included in the report with their consent. The CMA has also not do not understand the contents of this document, you should consult an authorized financial advisor. traded publicly (i.e. are not listed on a stock exchange), they are complex, usually illiquid and an independent tax advisor. The levels and basis of taxation are dependent on individual assessed the suitability of the investment for any particular investor or type of investor. It is hereby Under the Investment Fund Regulations, this document may not be distributed in the Kingdom long-lasting. Investments in a PE fund generally involve a significant degree of financial and/or circumstances and are subject to change. expressly understood and acknowledged that investments in financial markets may involve a high except to such persons as are permitted under the Investment Fund Regulations issued by the business risk. Investments in private equity funds are not principal-protected nor guaranteed. degree of complexity and risk of loss in value and may not be suitable to all investors. The suitability Capital Market Authority. The Capital Market Authority does not make any representation as to the Investors will be required to meet capital calls of investments over an extended period of time. SOURCES: assessment performed by CSLF with respect to this investment will be undertaken based on accuracy or completeness of this document, and expressly disclaims any liability whatsoever for any Failure to do so may traditionally result in the forfeiture of a portion or the entirety of the capital Information and opinions presented in this report have been obtained or derived from sources which information that the investor would have provided to CSLF as at the date of such assessment and in loss arising from, or incurred in reliance upon, any part of this document. Prospective subscribers of account, forego any future income or gains on investments made prior to such default and among in the opinion of CS are reliable, but CS makes no representation as to their accuracy or accordance with Credit Suisse internal policies and processes. It is understood that the English the securities offered hereby should conduct their own due diligence on the accuracy of the other things, lose any rights to participate in future investments or forced to sell their investments at completeness. CS accepts no liability for a loss arising from the use of this report. language will be used in all communication and documentation provided by CS and/or CSLF. By information relating to the securities. If you do not understand the contents of this document you a very low price, much lower than secondary market valuations. Companies or funds may be highly accepting to invest in the product, the investor expressly and irrevocably confirms that he fully should consult an authorized financial adviser. South Africa: This information is being distributed by leveraged and therefore may be more sensitive to adverse business and/or financial developments WEBSITES: understands, and has no objection to the use of the English language. Luxembourg: This report is Credit Suisse AG which is registered as a financial services provider with the Financial Sector or economic factors. Such investments may face intense competition, changing business or This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to distributed by Credit Suisse (Luxembourg) S.A., a duly autho- rized credit institution in the Grand Conduct Authority in South Africa with FSP number 9788 and / or by Credit Suisse (UK) Limited, economic conditions or other developments that may adversely affect their performance. which the report refers to website material of CS, CS has not reviewed the linked site and takes no Duchy of Luxembourg with registered address 5, rue Jean Monnet, L-2180 Luxembourg. Credit which is registered as a financial services provider with the Financial Sector Conduct Authority in responsibility for the content contained therein. Such address or hyperlink (including addresses or Suisse (Luxembourg) S.A. is subject to the prudential supervision of the Luxembourg supervisory South Africa with FSP number 48779. Spain: This document is a marketing material and is provided Interest rate and credit risks hyperlinks to CS’s own website material) is provided solely for your convenience and information and authority, the Commission de Surveillance du Secteur Financier (CSSF). Mexico: This document by Credit Suisse AG, Sucursal en España, legal entity registered at the Comisión Nacional del The retention of value of a bond is dependent on the creditworthiness of the Issuer and/or the content of the linked site does not in any way form part of this report. Accessing such a website represents the view of the person who provides his/her services to C. Suisse Asesoría México, S.A. Mercado de Valores for information purposes. It is exclusively addressed to the recipient for Guarantor (as applicable), which may change over the term of the bond. In the event of default by or following such a link through this report or CS’s website shall be at your own risk. de C.V. (“C. Suisse As- esoría”) and/or Banco Credit Suisse (México), S.A., Institución de Banca personal use only and, according to current regulations in force, by no means can it be considered the Issuer and/or Guarantor of the bond, the bond or any income derived from it is not guaranteed Múltiple, Grupo Financiero Credit Suisse (México) (“Banco CS”) so that both C. Suisse Asesoría and as a security offer, personal investment advice or any general or specific recommendation of and you may get back none of, or less than, what was originally invested. DATA PRIVACY: Banco CS reserve the right to change their mind at any time not assuming any liability in this regard. products or investment strategies with the aim that you perform any operation. The client shall be Your Personal Data will be processed in accordance with the Credit Suisse privacy statement This document is distributed for informational purposes only and does not imply a personal deemed responsible, in all cases, for taking whatever decisions on investments or disinvestments, Investment Solutions & Sustainability accessible at your domicile through the official Credit Suisse website: recommendation or suggestion, nor the invitation to celebrate any operation and does not replace and therefore the client takes all responsibility for the benefits or losses resulting from the Investment Solutions & Sustainability is responsible for multi-asset class strategy formation and https://www.credit-suisse.com/ the communication you have with your executive in relation to C. Suisse Asesoría and/or Banco CS operations that the client decides to perform based on the information and opinions included in this subsequent implementation in Credit Suisse’s (CS) discretionary and advisory businesses. If shown, In order to provide you with marketing materials concerning our products and services, Credit Suisse prior to taking any investment decision. C. Suisse Asesoría and/or Banco CS does not assume any document. This document is not the result of a financial analysis or research and therefore, neither it Model Portfolios are provided for illustrative purposes only. Your asset allocation, portfolio Group AG and its subsidiaries may process your basic Personal Data (i.e. contact details such as responsibility for investment decisions based on information contained in the document sent, as the is subject to the current regulations that apply to the production and distribution of financial weightings and performance may look significantly different based on your particular circumstances name, e-mail address) until you notify us that you no longer wish to receive them. You can opt out same may not take into account the context of the investment strategy and objectives of particular research, nor its content complies with the legal requirements of independence of financial and risk tolerance. Opinions and views of Investment Solutions & Sustainability may be different from receiving these materials at any time by informing your Relationship Manager. clients. Prospectus, brochures, investment regimes of investment funds, annual reports or periodic research. Turkey: The investment information, comments and recommendations contained herein from those expressed by other Departments at CS. Investment Solutions & Sustainability views may financial information contain all additional useful information for investors. These documents can be are not within the scope of investment advisory activity. The investment advisory services are change at any time without notice and with no obligation to update. CS is under no obligation to Distributing entities obtained free of charge directly from issuers, operators of investment funds, in the Internet page of provided by the authorized institutions to the persons in a customized manner taking into account ensure that such updates are brought to your attention. Except otherwise specified herein, this report is distributed by Credit Suisse AG, a Swiss bank, the stock exchange in which they are listed or through its executive in C. Suisse Asesoría and/or the risk and return preferences of the persons. Whereas, the comments and advices included herein authorized and regulated by the Swiss Financial Market Supervisory Authority Bahrain: This report is Banco CS. Past performance and the various scenarios of existing markets do not guarantee are of general nature. Therefore recommendations may not be suitable for your finan- cial status or From time to time, Investment Solutions & Sustainability may reference previously published distributed by Credit Suisse AG, Bahrain Branch, a branch of Credit Suisse AG, Zurich/Switzerland, present or future yields. In the event that the information contained in this document is incomplete, risk and yield preferences. For this reason, making an investment decision only by relying on the Research articles, including recommendations and rating changes collated in the form of lists. The duly authorized and regulated by the Central Bank of Bahrain (CBB) as an Investment Business incorrect or unclear, please contact your Executive of C. Suisse Asesoría and/or Banco CS as soon information given herein may not give rise to results that fit your expectations. This report is recommendations contained herein are extracts and/or references to previously published Firm Category 2. Related financial services or products are only made available to Accredited as possible. It is possible that this document may suffer modifications without any responsibility for distributed by Credit Suisse Istanbul Menkul Degerler Anonim Sirketi, regulated by the Capital

Disclaimer Important information 64 | 65 Markets Board of Turkey, with its registered address at Levazim Mahallesi, Koru Sokak No. 2 Zorlu this material or any other person from the use of or reliance on the information set out in this Commission, and was prepared in compliance with section 16 of the “Code of Conduct for Persons Center Terasevler No. 61 34340 Besiktas/Istanbul-Turkey. United Kingdom: This material is material. None of Credit Suisse or its affiliates (or their respective directors, officers, employees or Licensed by or Registered with the Securities and Futures Commission.” The contents of this distributed by Credit Suisse (UK) Limited. Credit Suisse (UK) Limited, is authorized by the advisers) makes any warranty or representation as to the accuracy, reliability and/or completeness material have not been reviewed by any regulatory authority in Hong Kong. You are advised to Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential of the information set out in this material. The information contained in this material has been exercise caution in relation to any offer. If you are in any doubt about any of the contents of this Regulation Authority. Where this material is distributed into the United Kingdom by an offshore provided as a general market commentary only and does not constitute any form of regulated material, you should obtain independent professional advice. No one may have issued or had in its entity not exempted under the Financial Services and Markets Act 2000 (Financial Promotion) financial advice, legal, tax or other regulated service. Observations and views contained in this possession for the purposes of issue, or issue or have in its possession for the purposes of issue, Order 2005 the following will apply: To the extent communicated in the United Kingdom (“UK”) or material may be different from, or inconsistent with, the observations and views of Credit Suisse’s whether in Hong Kong or elsewhere, any advertisement, invitation or material relating to this capable of having an effect in the UK, this document constitutes a financial promotion which has Research analysts, other divisions or the proprietary positions of Credit Suisse. Credit Suisse is product, which is directed at, or the contents of which are likely to be accessed or read by, the been approved by Credit Suisse (UK) Limited, which is authorized by the Prudential Regulation under no obligation to update, notify or provide any additional information to any person if Credit public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority Suisse becomes aware of any inaccuracy, incompleteness or change in the information contained in than where this product is or is intended to be disposed of only to persons outside Hong Kong or for the conduct of investment business in the UK. The registered address of Credit Suisse (UK) the material. To the extent that this material contains statements about future performance, such only to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Limited is Five Cabot Square, London, E14 4QR. Please note that the rules under the UK’s statements are forward looking and subject to a number of risks and uncertainties. Past Hong Kong and any rules made thereunder. SINGAPORE: This material is distributed in Singapore Financial Services and Markets Act 2000 relating to the protection of retail clients will not be performance is not a reliable indicator of future performance. by Credit Suisse AG, Singapore Branch, which is licensed by the Monetary Authority of Singapore applicable to you and that any potential compensation made available to “eligible claimants” under under the Banking Act (Cap. 19) to carry on banking business. This report has been prepared and the UK’s Financial Services Compensation Scheme will also not be available to you. Tax treatment For accounts managed by relationship managers and/or investment consultants of Credit Suisse issued for distribution in Singapore to institutional investors, accredited investors and expert depends on the individual circumstances of each client and may be subject to changes in future. AG, Hong Kong Branch: A Credit Suisse affiliate may have acted upon the information and analysis investors (each as defined under the Financial Advisers Regulations (“FAR”)) only. Credit Suisse AG, contained in this material before being made available to the recipient. A Credit Suisse affiliate may, Singapore Branch may distribute reports produced by its foreign entities or affiliates pursuant to an Important regional disclosure information to the extent permitted by law, participate or invest in other financing transactions with the issuer of arrangement under Regulation 32C of the FAR. Singapore recipients should contact Credit Suisse Pursuant to CVM Resolution No. 20/2021, of February 25, 2021, the author(s) of the report hereby any securities referred to herein, perform services or solicit business from such issuers, or have a AG, Singapore Branch at +65-6212-2000 for matters arising from, or in connection with, this certify(ies) that the views expressed in this report solely and exclusively reflect the personal opinions position or effect transactions in the securities or options thereof. To the fullest extent permitted by report. By virtue of your status as an institutional investor, accredited investor or expert investor, of the author(s) and have been prepared independently, including with respect to Credit Suisse. Part law, Credit Suisse and its affiliates and each of their respective directors, employees and Credit Suisse AG, Singapore Branch is exempted from complying with certain requirements under of the author(s)´s compensation is based on various factors, including the total revenues of Credit consultants do not accept any liability arising from an error or omission in this material or for any the Financial Advisers Act, Chapter 110 of Singapore (the “FAA”), the FAR and the relevant Notices Suisse, but no part of the compensation has been, is, or will be related to the specific recommenda- direct, indirect, incidental, specific or consequential loss and/or damage suffered by the recipient of and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse tions or views expressed in this report. In addition, Credit Suisse declares that: Credit Suisse has this material or any other person from the use of or reliance on the information set out in this AG, Singapore branch may provide to you. These include exemptions from complying with: provided, and/or may in the future provide investment banking, brokerage, asset management, material. None of Credit Suisse or its affiliates (or their respective directors, officers, employees or commercial banking and other financial services to the subject company/companies or its affiliates, advisers) makes any warranty or representation as to the accuracy, reliability and/ or completeness (i) Section 25 of the FAA (pursuant to Regulation 33(1) of the FAR for which they have received or may receive customary fees and commissions, and which of the information set out in this material. The information contained in this material has been (ii) Section 27 of the FAA (pursuant to Regulation 34(1) of the FAR); and constituted or may constitute relevant financial or commercial interests in relation to the subject provided as a general market commentary only and does not constitute any form of legal, tax or (iii) Section 36 of the FAA (pursuant to Regulation 35(1) of the FAR). company/companies or the subject securities. other regulated service. Observations and views contained in this material may be different from, or inconsistent with, the observations and views of Credit Suisse’s Research analysts, other divisions Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising UNITED STATES: NEITHER THIS REPORT NOR ANY COPY THEREOF MAY BE SENT, TAKEN or the proprietary positions of Credit Suisse. Credit Suisse is under no obligation to update, notify or from, or in connection with, this material. If you have any queries/objections relating to the receipt of INTO OR DISTRIBUTED IN THE UNITED STATES OR TO ANY US PERSON (within the meaning provide any additional information to any person if Credit Suisse becomes aware of any inaccuracy, marketing materials from us, please contact our Data Protection Officer at dataprotectionofficer. of Regulation S under the US Securities Act of 1933, as amended). incompleteness or change in the information contained in the material. To the extent that this [email protected] material contains statements about future performance, such statements are forward looking and (for Credit Suisse AG, HK Branch) or [email protected] (for Credit Suisse AG, SG APAC – IMPORTANT NOTICE subject to a number of risks and uncertainties. Past performance is not a reliable indicator of future Branch) or [email protected] (for Credit Suisse AG, Sydney Branch). The information provided herein constitutes marketing material; it is not investment research. For all, performance. For all: This material is not directed to, or intended for distribution to or use by, any except accounts managed by relationship managers and/or investment consultants of Credit Suisse person or entity who is a citizen or resident of, or is located in, any jurisdiction where such The entire contents of this document are protected by copyright law (all rights reserved). This AG, Hong Kong Branch: This material has been prepared by Credit Suisse AG (“Credit Suisse”) as distribution, publication, availability or use would be contrary to applicable law or regulation, or which document or any part thereof may not be reproduced, transmitted (electronically or otherwise), general information only. This material is not and does not purport to provide substantive research or would subject Credit Suisse and/or its subsidiaries or affiliates to any registration or licensing altered or used for public or commercial purposes, without the prior written permission of Credit analysis and, accordingly, is not investment research or a research recommendation for regulatory requirement within such jurisdiction. Materials have been furnished to the recipient and should not Suisse. © 2022, Credit Suisse Group AG and/or its affiliates. All rights reserved. Credit Suisse AG purposes. It does not take into account the financial objectives, situation or needs of any person, be redistributed without the express prior written consent of Credit Suisse. For further information, (Unique Entity Number in Singapore: S73FC2261L) is incorporated in Switzerland with limited which are necessary considerations before making any investment decision. The information please contact your Relationship Manager. To the extent that this material contains an appendix liability. provided is not intended to provide a sufficient basis on which to make an investment decision and is comprising research reports, the following additional notice applies to such appendix. not a personal recommendation or investment advice. Credit Suisse makes no representation as to 22C014A_IS the suitability of the products or services specified in this material for any particular investor. It does ADDITIONAL IMPORTANT NOTICE FOR APPENDIX not constitute an invitation or an offer to any person to subscribe for or purchase any of the products The reports in the Appendix (“Reports”) have been authored by members of the Credit Suisse or services specified in this material or to participate in any other transactions. The only legally Research department, and the information and opinions expressed therein were as of the date of binding terms are to be found in the applicable product documentation or specific contracts and writing and are subject to change without notice. Views expressed in respect of a particular security confirmations prepared by Credit Suisse. For accounts managed by relationship managers and/or in the Reports may be different from, or inconsistent with, the observations and views of the Credit investment consultants of Credit Suisse AG, Hong Kong Branch: This material has been prepared Suisse Research department of the Investment Banking division due to the differences in evaluation by Credit Suisse AG (“Credit Suisse”) as general information only. This material is not and does not criteria. These Reports have been previously published by Credit Suisse Research on the web: purport to provide substantive research or analysis and, accordingly, is not investment research for regulatory purposes. It does not take into account the financial objectives, situation or needs of any Credit Suisse does and seeks to do business with companies covered in its research reports. As a person, which are necessary considerations before making any investment decision. Credit Suisse result, investors should be aware that Credit Suisse may have a conflict of interest that could affect makes no representation as to the appropriateness of the products or services specified in this the objectivity of these Reports. material for any particular investor. It does not constitute an invitation or an offer to any person to subscribe for or purchase any of the products or services specified in this material or to participate For all, except accounts managed by relationship managers and/or investment consultants of Credit in any other transactions. The only legally binding terms are to be found in the applicable product Suisse AG, Hong Kong Branch: Credit Suisse may not have taken any steps to ensure that the documentation or specific contracts and confirmations prepared by Credit Suisse. For all: In connec- securities referred to in these Reports are suitable for any particular investor. Credit Suisse will not tion with the products specified in this material, Credit Suisse and/or its affiliates may: treat recipients of the Reports as its customers by virtue of their receiving the Reports. For accounts managed by relationship managers and/or investment consultants of Credit Suisse AG, Hong Kong (i) h ave had a previous role in arranging or providing financing to the subject entities; Branch: Credit Suisse may not have taken any steps to ensure that the securities referred to in (ii) be a counterparty in any subsequent transaction in connection with the subject entities; or these Reports are appropriate for any particular investor. Credit Suisse will not treat recipients of the (iii) pay, or may have paid, or receive, or may have received, one-time or recurring Reports as its customers by virtue of their receiving the Reports. For all: For a discussion of the remuneration from the entities specified in this material, as part of its/their compensa- risks of investing in the securities mentioned in the Reports, please refer to the following Internet tion. These payments may be paid to or received from third parties. link: https://investment.credit-suisse.com/re/riskdisclosure/ Credit Suisse and/or its affiliates (including their respective officers, directors and employees) may For information regarding disclosure information on Credit Suisse Investment Banking rated be, or may have been, involved in other transactions with the subject entities specified in this companies mentioned in this report, please refer to the Investment Banking division disclosure site material or other parties specified in this material which are not disclosed in this material. Credit at: https://rave.credit-suisse.com/disclosures/ Suisse, for itself and on behalf of each of its affiliates, reserves the right to, provide and continue to provide services, and deal and continue to deal with the subject entities of the products specified in For further information, including disclosures with respect to any other issuers, please refer to the this material or other parties in connection with any product specified in this material. Credit Suisse Credit Suisse Global Research Disclosure site at: https://www.credit-suisse.com/disclosure/ or its affiliates may also hold, or may be holding, trading positions in the share capital of any of the subject entities specified in this material. AUSTRALIA This material is distributed in Australia by Credit Suisse AG, Sydney Branch solely for information purposes only to persons who are “wholesale clients” (as defined by section 761G(7) of For all, except accounts managed by relationship managers and/or investment consultants of Credit the Corporations Act). Credit Suisse AG, Sydney Branch does not guarantee the performance of, Suisse AG, Hong Kong Branch: A Credit Suisse affiliate may have acted upon the information and nor make any assurances with respect to the performance of any financial product referred herein. analysis contained in this material before being made available to the recipient. A Credit Suisse In Australia, Credit Suisse Group entities, other than Credit Suisse AG, Sydney Branch, are not affiliate may, to the extent permitted by law, participate or invest in other financing transactions with authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Cth.) and their the issuer of any securities referred to herein, perform services or solicit business from such issuers, obligations do not represent deposits or other liabilities of Credit Suisse AG, Sydney Branch. Credit or have a position or effect transactions in the securities or options thereof. To the fullest extent Suisse AG, Sydney Branch does not guarantee or otherwise provide assurance in respect of the permitted by law, Credit Suisse and its affiliates and each of their respective directors, employees obligations of such Credit Suisse entities or the funds. HONG KONG: This material is distributed in and consultants do not accept any liability arising from an error or omission in this material or for any Hong Kong by Credit Suisse AG, Hong Kong Branch, an Authorized Institution regulated by the direct, indirect, incidental, specific or consequential loss and/or damage suffered by the recipient of Hong Kong Monetary Authority and a Registered Institution regulated by the Securities and Futures

66 | 67 Imprint Authors/Contributors Editor-in-chief Editorial deadline Daniel Rupli Ralf Büsser Philipp Lisibach 11 November 2022 Head of Single Security Research, Equity Credit Head of Portfolio Strategy and Risk Head of Global Investment Strategy Design David Sneddon Claude Maurer Managing editor LINE Communications AG Head of Global Technical Analysis Chief Economist Switzerland Nannette Hechler-Fayd’herbe Head of Global Economics & Research Translations Tobias Merath Anand Datar Credit Suisse Language & Translation Services Head of Wealth Content Strategy Alternative Investments Strategist Editorial support Catherine McLean Trachsler More information Luca Bindelli Sarah Leissner Christa Jenni credit-suisse.com/investmentoutlook Head of Global FI, FX and Commodity Strategy Alternative Investments Strategist Christine Mumenthaler Flurina Krähenbühl Marc Häfliger Rasmus Rousing Head of Global Equity Strategy Equity Strategist Project management Camilla Damm Leuzinger David Wang Laura Smith Claudia Biri Head of China Economics Equity Strategist Serhat Günes Laurence Lam Jelena Kucenko Sunny Chabriya Head of Global Alternative Investments Strategy Equity Strategist Jessie Gisiger Satish Aluri Head of Global Credit Strategy and Equity Strategist Investment Themes Florence Hartmann Stefan Graber Emerging Market Bonds & FX Strategist Head of Global Commodity Strategy Francesco Mazzeo References Karsten Linowsky Sustainable Investment Analyst Head of Global Currency Strategy 1 Solar Industry Supply Chain That Will Beat Climate Change Is Already Being Built – Bloomberg 2 UK’s Biggest-Ever Renewables Auction Is Also the Cheapest – Bloomberg 3 Solar power generation (ourworldindata.org) 4 Renewable electricity – Renewable Energy Market Update – May 2022 – Analysis – IEA 5 Solar Industry Supply Chain That Will Beat Climate Change Is Already Being Built – Bloomberg 6 Solar Is Now 33% Cheaper Than Gas Power in US, Guggenheim Says – Bloomberg

credit-suisse.com © 2022, CREDIT SUISSE