CIO Insights Resilience versus recession The Chinese property market’s long-standing problems have been exacerbated to some degree by the Covid-19 pandemic. The sector is responsible for roughly 25% of the country’s economic output and is therefore extremely relevant. We expect that the Chinese government will be able to further stabilise the market as the year progresses. Stimulation of buyer demand by rolling back the country’s strict Covid-19 restrictions further would of course help – but international capital markets may remain sceptical. We do not expect another 2022-style sell-off in global bond markets in 2023. However, if high inflation should prove to be more stubborn than generally expected or climbs even further, this could drive up bond yields again. If the yields on 10-year U.S. government bonds were to rise markedly, we believe that this would risk another sell-off with a significant impact also on stock markets and especially on securities with high interest rate sensitivity, such as those in the technology sector. The major risks in 2023 will be familiar ones from previous years: geopolitics, the fight for global technology leadership, the Covid-19 pandemic, China’s real estate market and a sell-off in the bond market. But there will be important differences too. Risks: known unknowns Market and portfolio implications: o Escalation of geopolitical tensions could amplify market upheavals o Fight for global technology leadership has extensive consequences for many market sectors o Potential downward pressure within the bond market could impact stock markets In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Performance refers to a nominal value based on price gains/losses and does not take into account inflation. Inflation will have a negative impact on the purchasing power of this nominal monetary value. Depending on the current level of inflation, this may lead to a real loss in value, even if the nominal performance of the investment is positive. Investments come with risk. The value of an investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk. This document was produced in December 2022. 22