Market overview: Financial markets keep their cool

The financial markets continue to be unruffled by the potential negative consequences of the trade tariffs and the slowdown in the US economy. The only significant reaction is in the price of gold, which reached new all-time highs on several occasions, in particular in the context of the growing number of attacks on institutions.

The bond markets remained largely unchanged month-on-month – with the exception of the USA, where long-term interest rates fell sharply following a weak labour market report. However, there is still little sign of any real economic concern on the bond markets. 

Indexed performance of government bonds in local currency

100 = 01.01.2025

This graphic shows the performance of government bonds from Switzerland, the USA and Germany in local currency. Price performance was volatile last year, and this initially continued into the new year. By April, however, the USA and Switzerland were seeing an upward trend, while a downward trend was taking shape in Europe, although these trends were then abruptly interrupted by the announcement of tariffs.
Source: SIX, Bloomberg Barclays

Overall, the bond markets saw little change month-on-month. In Europe, the bond markets initially came under downward pressure as a result of growing concerns about public finances in France and the UK. In France, the political debate around the national budget even led to a change of government. At the beginning of September, however, the latest US labour market report, which confirmed the signs of weakness apparent in previous months, fuelled concerns about future economic performance, both in the USA and around the world. As a result, long-term yields to maturity on government bonds fell. While the performance of US government bonds was positive month-on-month, it ultimately remained in neutral territory in Europe.

Trend in 10-year yields to maturity

In percent

The graphic shows the performance of yields to maturity on 10-year government bonds in Switzerland, the USA and Germany. 10-year yields to maturity are an important benchmark for interest rate developments. A strong downward trend can be observed over the long term. However, we have seen a trend reversal towards higher interest rates since spring 2022. This trend continued to slow over the course of 2024, with Switzerland even experiencing a trend towards lower interest rates.
Source: SIX, Bloomberg Barclays

Following the weak labour market data, 10-year yields to maturity in the USA fell by more than 20 basis points and now stand at just under 4.0 percent. The latest inflation figures, showing renewed upward pressure, did little to change this. While their performance was more volatile as a result of the political uncertainties faced by France and the UK, yields to maturity in Europe remained largely unchanged month-on-month. The Swiss bond market, by contrast, was calm. 10-year Swiss government bonds remain at a low level, yielding just under 0.2 percent. 

Credit spreads on corporate bonds

In percentage points

This graphic shows the difference between the yields to maturity on government and corporate bonds in US dollars, euros and Swiss francs. These spreads widened considerably in the first half of 2022, only to narrow significantly again during the second half of the year and at the beginning of the following year. Credit spreads widened slightly again in March 2023, before levelling off at a low level. Spreads widened further in the wake of the trade restrictions announced by the USA, before narrowing shortly afterwards to return to historically low levels.
Source: Bloomberg Barclays

Credit spreads on corporate bonds remain at historically low levels. Spreads again narrowed month-on-month, in particular for bonds with lower credit ratings, and most notably in the USA, putting them at the lower end of the range seen over the past 25 years. Investors appear to continue to have few worries about recession, despite the fact that in light of recent weak labour market data, risks have increased both in the USA and around the world.

Equity markets around the world made slight gains last month, despite growing scepticism with regard to the stability of the US economy. The Swiss SMI performed very strongly this month, benefiting from the large price gains made by the pharmaceutical giants.

Indexed stock market performance in Swiss francs

100 = 01.01.2025

This graphic shows the performance of the equity markets in Switzerland, worldwide and in emerging markets over the past 12 months in Swiss francs. The losses in April 2025 caused by the turbulence in world trade have now been almost fully offset.
Source: SIX, MSCI

The stock markets predominantly performed positively last month, in terms of both local currencies and Swiss francs. Despite growing concerns about a stagnating US economy and political encroachment on key institutions such as the Federal Reserve, the stock markets remained extremely calm. The Swiss stock market was particularly strong, rising by more than 3 percent as part of a trend driven by the performance of pharmaceutical giants Roche and Novartis, whose shares made significant gains following successful study and research findings concerning important drugs.

Momentum of individual markets

In percent

The graphic shows the momentum of 12 major equity markets worldwide. Momentum compares the latest price level with the average figures from the past six months. While it was still in negative territory in April, momentum on all markets is currently positive.
Source: MSCI

Despite the deteriorating economic environment, the positive momentum of the previous month continued on the stock markets. The French market again saw the poorest performance as the weak positive momentum of the previous month continued. The political turmoil surrounding the national budget and the change of government will no doubt have weighed particularly heavily on the market last month. It should also be noted that the German stock market has lost considerable momentum recently, mainly as a result of index heavyweight SAP, whose share price fell sharply last month, depressing the stock market as a whole.

Price/earnings ratio

The graphic shows the price/earnings ratio (P/E ratio) for the stock markets in Switzerland, worldwide and in emerging markets since 2000. In response to rising corporate earnings and falling equity prices, the P/E ratios of the three markets have declined considerably since summer 2020. However, P/E ratios have increasingly recovered since the end of 2022 thanks to higher equity prices.
Source: SIX, MSCI

Price/earnings ratios (P/E ratios) on the global stock markets again remain high this month. The global stock market in particular, dominated as it is by US tech companies, benefited from the ongoing euphoria surrounding artificial intelligence, which pushed valuations higher, reversing the slight decline in valuations following the trade crisis in spring.

Exchange-listed Swiss real estate funds again made significant gains last month and are now achieving a similar return on an annual basis as Swiss equities.

Indexed performance of Swiss real estate funds

100 = 01.01.2025

The graphic shows the indexed average performance of listed Swiss real estate funds over the past 12 months. Price performance over the period shown was extremely volatile. Swiss real estate fund prices rose significantly last month to reach new highs.
Source: SIX

Exchange-listed Swiss real estate fund prices rose by over 3 percent over the course of the month. This puts their annual return at just under 7 percent. Switzerland’s continuing low capital market interest rates and the recent trend that has seen many banks raising their fees for institutional customer deposits are likely to have bolstered this month’s renewed demand for alternative investments.

Premium on Swiss real estate funds and 10-year yields to maturity

In percent

This graphic shows the yield to maturity of 10-year Swiss government bonds and the premium on real estate properties contained in Swiss real estate funds since 2000. The sharp rise in interest rates in 2022 led to a substantial fall in premiums. Over the course of the past year, however, premiums have gone up again. This trend has continued this year.
Source: SIX

As with real estate fund prices, the premium paid by stock market investors versus the net asset value of properties rose again this month. This puts premiums both at their highest level since the beginning of the year and still well above the long-term average. Higher premiums have so far only been seen during periods of negative capital market interest rates.

3-month SARON and 10-year yields to maturity

In percent

This graphic shows the Swiss reference interest rate SARON with a three-month term and the yields to maturity of 10-year Swiss government bonds since 2000. Both the three-month reference interest rate and capital market interest rates fell over the course of the year.
Source: SIX

Yields to maturity on 10-year Swiss government bonds remain at just 20 basis points, close to their lows for the year. Given that inflation in Switzerland has recently returned to slightly positive territory, market participants are not expecting any further policy rate cuts this year.

Currencies

The performance of most currencies last month was similar to the year as a whole. While the US dollar tended to be weak, the Swiss franc performed strongly.

Currency pairPricePPP Neutral range Valuation
Currency pair
EUR/CHF
Price
0.93
PPP
0.93
Neutral range
0.86 – 1.00
Valuation
Euro neutral
Currency pair
USD/CHF
Price
0.80
PPP
0.80
Neutral range
0.69 – 0.90
Valuation
USD neutral
Currency pair
GBP/CHF
Price
1.08
PPP
1.20
Neutral range
1.04 – 1.36
Valuation
Pound sterling neutral
Currency pair
JPY/CHF
Price
0.54
PPP
0.86
Neutral range
0.70 – 1.02
Valuation
Yen undervalued
Currency pair
SEK/CHF
Price
8.50
PPP
9.97
Neutral range
8.92 – 11.03
Valuation
Krone undervalued
Currency pair
NOK/CHF
Price
7.99
PPP
10.51
Neutral range
9.25 – 11.77
Valuation
Krone undervalued
Currency pair
EUR/USD
Price
1.17
PPP
1.16
Neutral range
1.01 – 1.31
Valuation
Euro neutral
Currency pair
USD/JPY
Price
147.42
PPP
92.82
Neutral range
70.92 – 114.72
Valuation
Yen undervalued
Currency pair
USD/CNY
Price
7.12
PPP
6.30
Neutral range
5.81 – 6.79
Valuation
Renminbi undervalued

Source: Allfunds Tech Solutions

After a brief respite at the end of last month, the US dollar’s downward trend resumed this month. Against the Swiss franc, the US dollar is now again trading close to this year’s lows. While the euro was also slightly weaker in trading against the Swiss franc, there was little change in the currency pair over the year as a whole.  

Cryptocurrencies

CryptocurrencyPriceYTD in USDAnnual highAnnual low
Cryptocurrency
BITCOIN
Price
115,533
YTD in USD
23.72%
Annual high
123,360
Annual low
76,244
Cryptocurrency
ETHEREUM
Price
4,462
YTD in USD
33.93%
Annual high
4,836
Annual low
1,471

Source: Allfunds Tech Solutions, Coin Metrics Inc

Gold

The gold price, measured in Swiss francs, rose considerably last month.

Indexed performance of gold in Swiss francs

100 = 01.01.2025

This graphic shows the indexed performance of gold in Swiss francs over the year. The gold price has shown strong performance since the beginning of the year, reaching new highs on several occasions. The precious metal reached new highs last month.    Source: Allfunds Tech Solutions
Source: Allfunds Tech Solutions

In recent months, the price of gold has for the most part trended sideways. That changed this month. Gold prices rose rapidly, gaining 6 percent to reach new highs, including as measured in Swiss francs. This is likely partly in response to the ongoing uncertainty surrounding the impact of the trade dispute and the US President’s growing number of attacks on key US institutions.

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