Our positioning: Cautious positioning maintained

Stock markets worldwide made a positive start to the new year, but price gains were very unevenly distributed. While tech-heavy Asian stock markets, such as Taiwan and South Korea, made a brilliant start to the year, US stocks lagged far behind those of other markets. This geographical shift continues a trend that was already apparent towards the end of last year and underlines our cautious stance towards the expensive, tech-heavy US market.

Geopolitical turbulence creates uncertainty

The financial markets proved remarkably resilient to political headwinds. In the first weeks of the year, events on the global political stage came thick and fast. The year began with the deployment of American troops in Venezuela. What was initially presented as a fight against drug trafficking and President Maduro soon morphed into rhetoric about the South American country’s vast oil reserves. The announcement that Greenland could be annexed by force, if necessary, made even greater waves. European NATO allies who oppose such a takeover were promptly threatened with higher trade tariffs. If that weren’t enough, the independence of the US Federal Reserve (Fed) has also come under attack. A criminal investigation into Fed Chair Jerome Powell shook confidence in an institution that’s supposed to be politically independent.

This cluster of geopolitical and institutional shocks is creating an environment of heightened uncertainty. In such phases, gold proves to be a reliable hedging component. The gold price has already reached new all-time highs several times since the start of the year, underlining its role as a safe haven. As the year begins, we anticipate a persistently uncertain environment and are maintaining our cautious positioning. We’re retaining our overweight in gold and slightly underweighting equities. Within equities, we continue to favour global value stocks over the US stock market. This positioning proved successful last year. Value stocks benefit from broad diversification and lower dependence on highly valued individual shares.

Emerging market equities with strong momentum

Emerging market equities were amongst the highest-yielding asset classes last year. The continued weakness of the US dollar and growing investor reticence about the highly valued US market were major factors in this development. As the dollar remains overvalued on a trade-weighted basis despite weakness last year, which means it may depreciate further, we see favourable conditions for emerging market investments.

Demand for Swiss real estate in the low interest rate environment

Swiss real estate funds also maintained their strong position in the portfolio. They rose by over 10 percent for the second time in a row last year, driven in part by the investment crisis on the Swiss market. Throughout the second half of last year, capital market interest rates in Switzerland were close to zero, making real estate funds an attractive option thanks to their stable profit distributions. The year began on a calm note. Prices remain largely unchanged from the level seen at the beginning of January. However, the latest inflation figures indicate that economic momentum remains weak, which means that a return to negative interest rates can’t be ruled out. In such conditions, real estate funds with distribution yields of over 2 percent are an attractive alternative to cash investments, which is why we’re maintaining our overweight position.

Performance of asset classes

Our positioning – Swiss focus