ALTERNATIVE MARKETS UPDATE – END MARCH 2024

​High inflation in the past years has led to strong interventions by central banks. Consequentially, interest rates were increased to levels last seen during the global financial crisis in 2007/08. Inflation has since declined substantially and has reached “manageable” levels. This development led to positive real rates in most economies and led to the question of when central banks would start to lower interest rates. This is especially the case, as interest rates remain at levels set in the summer of 2023 with no movement since then. In March 2024, the Swiss National Bank was the first central bank of the G7 currencies that lowered their interest rates. Interest rates in Switzerland declined from 1.75% to 1.5%. While this is a positive signal for the anticipated rate cuts throughout 2024, it needs to be stated that Switzerland was an exception over the past years. Most Western countries saw inflation rise close to 10% or above. In contrast, Switzerland’s inflation reached a height of only 3.4%. Most likely dates for rate cuts in the remaining economies are expected around June and July 2024 based on the current market sentiment. Inflation in the US, UK, and Eurozone remain relatively sticky around the 3% to 4% mark. It is likely that these central banks want to see a further declining trend in inflation ahead interest cuts. Figure 1 summarizes the development in interest rates and inflation from the beginning of January 2023 to March 2024.

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RESEARCH PERSPECTIVE VOL. 224 March 2024 Alternative Markets Update High inflation in the past years has led to strong interventions by central banks. Consequentially, interest rates were increased to levels last seen during global financial crisis in 2007/08. Inflation has since declined substantially and has reached “manageable” levels. This development led to positive real rates in most economies and led to the question when central banks would start to lower interest rates. This is especially the case, as interest rates remain at levels set in the summer of 2023 with no movement since then. In March 2024, the Swiss National Bank was the first central bank of the G7 currencies that lowered their interest rates. Interest rates in Switzerland declined from 1.75% to 1.5%. While this is a positive signals for the anticipated rate cuts throughout 2024, it needs to be stated that Switzerland was an exception over the past years. Most Western countries saw inflation rise close to 10% or above. In contrast, Switzerland’s inflation reached a height of only 3.4%. Most likely dates for rate cuts in the remaining economies are expected around June and July 2024 based on the current market sentiment. Inflation in the US, UK, and Eurozone remain relatively sticky around the 3% to 4% mark. It is likely that these central banks want to see a further declining trend in inflation ahead interest cuts. Figure 1 summarizes the development in interest rates and inflation from the beginning of January 2023 to March 2024. Figure 1: Inflation Rates and Interest Rates in the US, EU, UK, and Switzerland from January 2023 to March 2024, Sources: US Bureau of Labor Statistics, Federal Reserve, Eurostat, European Central Bank, Office for National Statistics, Bank of England, Swiss Federal Statistical Office, Swiss National Bank, TradingEconomics, March 2024 Oil has a relatively stable year in 2023 and ended close to its lowest point at around $70 per barrel of WTI crude oil. Since 2024, oil is gaining steadily with one exception in February 2024 and has reclaimed positive territory compared to the beginning of 2023. More recently, the attacks on oil refineries in the Russia-Ukraine war led to higher prices. The outlook for oil prices remains positive, as the OPEC+ has reiterated their stance against increasing the oil supply and Russia announcing further voluntary output cuts. The geopolitical tensions in the Middle East put further pressure on the oil markets and its security. Should interest rate cuts materialize, oil is also likely to benefit, as lower rates stimulate companies, which typically increases oil demand. Figure 2 summarizes the development of the WTI crude oil price since the beginning of 2023. Figure 2: WTI Crude Oil and Its Performance Since January 2023, Source: FXEmpire, March 2024 STONE MOUNTAIN CAPITAL Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Dubai and Umm Al Quwain in United Arab Emirates. We are advising 30+ best in class single hedge fund and multi-strategy managers across equity, credit, and tactical trading (global macro, CTAs and volatility). 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