Since the sharp rise in long-term interest rates lasting until the beginning of November, they have fallen again significantly. In the US, the new US Treasury Secretary, seen as more moderate than Trump, is likely to have contributed to this decline. In Switzerland, capital market interest rates fell further from their already low level.

Indexed performance of government bonds in local currency

100 = 01.01.2024

Last month, most government bonds gained significantly in value. The price gains on Swiss government bonds in particular were extremely strong, a development in which recent remarks by the new Chairman of the Swiss National Bank (SNB) regarding negative interest rates likely also played a role. At the end of November, he made a surprisingly clear statement asserting that negative interest rates work and are part of the SNB’s toolbox, a statement likely to have fuelled expectations of further interest rate cuts. The decline in Swiss interest rates this year is now so sharp that yields on Swiss government bonds are currently negligible.

Trend in 10-year yields to maturity

In percent

Yields to maturity on 10-year government bonds rose significantly until the beginning of November, particularly in the US in the wake of Donald Trump’s re-election. Since then, however, they have again fallen sharply. One reason for this may be the choice as US Treasury Secretary of Scott Bessent, who is seen as market-friendly and whose appointment has eased tensions on the US bond markets. Yields to maturity on European government bonds have also fallen again recently, a decline likely to some extent the result of continuing disappointing economic data from Europe.

Credit spreads on corporate bonds

In percentage points

Risk premiums on corporate bonds remain at a low level. In the US, they actually saw a slight decline last month and are now trading at historically low levels. In the eurozone, by contrast, they rose slightly from a low level. Disappointing economic data and the political uncertainties prevailing in France and Germany will no doubt have contributed to this increase. Overall, however, there is still little significant fear of recession in the market for corporate bonds.

The US stock markets continued to benefit from the positive mood following Donald Trump’s election victory. By contrast, the European and Swiss stock markets suffered from the political uncertainties in France and Germany, as well as concerns about possible protectionist measures in the United States.

Indexed stock market performance in Swiss francs

100 = 01.01.2024

The US equity markets remain optimistic, and with a gain of over 6 percent actually recorded their best month of the year in November. The leading US indices reached new all-time highs several times. By contrast, the Swiss equity market and emerging market equities fell. Fears of more restrictive trade relations with the US are likely to have played a role here, particularly in emerging markets. The US President-elect had recently taken aim at the group of emerging economies known as the BRICS countries with a demand that they either commit to the US dollar or face the threat of high punitive tariffs.  

Momentum of individual markets

In percent

The picture on the global equity markets remains mixed. While the markets in the US and large parts of Asia saw positive momentum last month, it has continued to tail off in the eurozone. Compared to the previous month, only the Japanese equity market managed to reverse its trend. The European equity markets remained weak overall, in particular the French market, which in view of the country’s ongoing political uncertainty fell significantly in value. The German equity market by contrast maintained its slightly positive momentum by virtue of a number of index heavyweights with strong share prices.

Price/earnings ratio

This month again, price/earnings ratios (P/E ratios) rose only in the US, while they fell in both Switzerland and in emerging markets. This is likely primarily due to the differing performance of the equity markets. Share prices rose sharply in the USA, while they continued to fall in Switzerland and in emerging markets.

Last month, Swiss real estate funds again made significant gains, further consolidating their strong performance in 2024.  

Indexed performance of Swiss real estate funds

100 = 01.01.2024

After generally trending sideways in October and early November, Swiss real estate funds resumed their upward trend from the end of November to make strong gains. Since the beginning of the year, their increase in value amounts to 16 percent. This performance is well above that of the Swiss equity market, which has been weakening since the middle of the year. A key reason for the increase in value is likely to have been the significant decline in Swiss capital market interest rates this year, with the yield to maturity on 10-year Swiss government bonds now standing at just over 0.2 percent. At the beginning of the year, it was still fluctuating between 0.8 and 1 percent.

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

In percent

With the recent rise in the value of real estate funds, the premium that investors usually have to pay on the stock exchange compared to the actual net asset value (NAV) of properties has also increased. The current level of premiums is high by historical standards, and only previously reached in individual periods between 2015 and 2021, when yields to maturity on 10-year Swiss government bonds were in negative territory. Against this backdrop, there appear to be certain limits to the future performance of Swiss real estate funds.

3-month SARON and 10-year yields to maturity

In percent

Yields to maturity on 10-year Swiss government bonds again fell significantly last month and are now only just in positive territory. This means that long-term interest rates are still well below short-term interest rates, which remain unchanged at 1.0 percent as measured by the 3-month SARON. This situation is unusual, as investors usually require higher remuneration for long-term capital lending and the higher risk associated with it than for short-term lending. However, this imbalance could be resolved in the course of next year, because market participants expect a further significant reduction in the policy rate by the Swiss National Bank (SNB), which would push short-term interest rates down proportionately.  

Currencies

The US dollar remains strong against its most important trading partners. The only currency to gain slightly against the US dollar last month was the Japanese yen.

^{Source: Allfunds Tech Solutions}

The US dollar again remained strong against its most important trading partners this month. While the appointment of a moderate and market-friendly Treasury Secretary may have curbed fears of a new trade war somewhat, the fact remains that the economic situation in the US continues to be more robust than in other regions. By contrast, the euro remained weak this month, losing value in response to growing political uncertainty in France. The euro lost more than 3 percent against the US dollar. The Swiss franc also gained against the euro. The Japanese yen recovered somewhat from the depreciation that began in September. With inflation data suggesting a continued rise in consumer prices, the currency has appreciated by almost 5 percent against the US dollar since the middle of the month.  

^{Source: Allfunds Tech Solutions, Coin Metrics Inc}

Gold

The gold price in Swiss francs again reached a new all-time high in November, but then fell back slightly.

Indexed performance of gold in Swiss francs

100 = 01.01.2024

After falling significantly until mid-November, the gold price in Swiss francs rose again sharply in the second half of the month, even reaching new highs at times. However, the next correction soon followed. Two factors are likely to have contributed to this correction: first, the ceasefire agreement between Israel and Hezbollah will no doubt have reduced demand for gold as a safe haven. Second, the appointment of Scott Bessent as US Treasury Secretary, representing a moderate, financial market-friendly choice which somewhat reduced fears of a trade war.