Following a significant easing in global long-term interest rates in November, a turnaround took place in December. The strongest rise was in yields to maturity on US government bonds, which are now back above 4.6 percentage points.

Indexed performance of government bonds in local currency

100 = 01.01.2025

Last month, government bonds worldwide gave back most of their November price gains – despite further policy rate cuts in the eurozone, Switzerland and the USA. The increase is probably mainly due to the interest rate decision taken by the US Federal Reserve (Fed). In mid-December, the Fed dampened expectations of any monetary easing until 2025, which is likely to have led to the significant losses on the bond markets.

Trend in 10-year yields to maturity

In percent

After falling significantly since November, a turnaround in yields to maturity on government bonds began in mid-December. In particular, the US Federal Reserve’s subdued expectations regarding monetary easing for 2025 are likely to have played a key role here. While 10-year yields to maturity in the USA were still at just under 4.2 percentage points at the beginning of December, they have now risen to over 4.6 percentage points. Yields to maturity on Swiss government bonds also rose significantly. These yields were still at around 20 basis points at the beginning of December, but have since recovered significantly, and at 50 basis points are back at the level before the slump at the end of November.  

Credit spreads on corporate bonds

In percentage points

Credit spreads on corporate bonds remain low, and in some cases have fallen further. In particular, the increase in credit spreads on European corporate bonds last month proved to be only temporary. These remarkably low levels continue to suggest that fears of recession are currently not playing a role in the corporate bond market.

Equity markets around the world faltered last month, with the US stock markets, in particular, showing weakness. Fears of inflation and diminishing expectations of interest rate cuts are likely to have contributed significantly to this trend.

Indexed stock market performance in Swiss francs

100 = 01.01.2025

The US stock markets failed to maintain their positive mood following Donald Trump’s election victory last month, and actually declined. At the beginning of December, US and global equity markets largely trended sideways, but came under substantial pressure in mid-December, in particular after the US Federal Reserve sharply reduced its outlook for interest rate cuts for 2025. The Swiss stock market, by contrast, was one of the few equity markets to buck this trend. Over the year as a whole, and despite some significant periods of weakness, the global equity markets still performed strongly last year.

Momentum of individual markets

In percent

The loss of momentum on the stock markets last month was reflected in their performance, with almost all of them tailing off considerably. The only stock markets still showing positive momentum are the American or AI-driven markets such as Taiwan. By contrast, the clearly negative momentum on the Dutch equity market remains striking, with the share price of index heavyweight and semiconductor equipment manufacturer ASML falling by almost 30 percent in the second half of the year. Here, a decline in demand and concerns about the escalating chip dispute between the US and China are likely to have played a significant role.  

Price/earnings ratio

Price/earnings ratios (P/E ratios) fell slightly last month, likely primarily due to declining share prices. Most of the world’s stock markets came under some pressure last month. In Switzerland, however, P/E ratios rose slightly on the back of the increase in share prices.

Following the sharp rise at the beginning of December, Swiss real estate funds trended sideways over the rest of the month.

Indexed performance of Swiss real estate funds

100 = 01.01.2025

In response to falling interest rates on the Swiss capital market, Swiss real estate funds performed particularly strongly at the end of November and beginning of December, but this trend has not continued since then. Since the beginning of December, Swiss real estate funds have trended sideways. The recovery in interest rates on the Swiss capital market is likely to have taken the wind out of the sails of the positive trend. In terms of the past year, however, a return of over 17 percent on real estate funds is still very impressive.

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

In percent

Due to the moderate performance of real estate funds, the premium that investors usually have to pay on the stock exchange versus the actual net asset value (NAV) of properties has hardly changed. By historical standards, these premiums are still high. Higher premiums have only been seen during periods of negative capital market interest rates.

Vacancy rate and real estate prices

In percent

Prices for rental apartments continued to rise in the past quarter, although only slightly. By contrast, prices for single-family homes again saw a significant increase. This was likely fostered in part by the decline in long-term capital market interest rates and continued tight supply. Prices for owner-occupied apartments, on the other hand, continue to fall. This is probably still due to a wait-and-see attitude on the part of potential buyers, who are waiting for financing costs to fall further in response to expected monetary easing, and are therefore hesitant to buy. The latest vacancy rate figures, on the other hand, show an unchanged situation. 

Currencies

The US dollar posted further gains versus its most important trading partners. The Japanese yen, by contrast, reversed the previous month’s upward trend.

^{Source: Allfunds Tech Solutions}

The US dollar continued its upward trend against its most important trading partners last month. Market participants will likely have seen the statements of Fed Chairman Powell, pointing to stubborn US inflation and Trump’s potentially inflationary policies at the year’s last meeting, as being supportive of the US dollar. Over the course of the year, the US dollar, in turn, appreciated by 7 percent against both the euro and the Swiss franc.

The Japanese yen, by contrast, proved unable to continue its upward trend from November, losing over 4 percent against the US dollar over the course of the month. The yen is again currently trading above 158 US dollars, its lowest level since July 2024.

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

Gold

The gold price, measured in Swiss francs, returned to its annual highs at the end of the year.

Indexed performance of gold in Swiss francs

100 = 01.01.2025

After a slight correction of the gold price in Swiss francs in mid-December, it recovered to a high of 2,400 francs per troy ounce by the end of the year. The weakness of the Swiss franc against the US dollar is likely to have been a key factor behind the monthly return of over 3 percent. The gold price in US dollars remained unchanged over the course of the month. The annual return on gold, measured in Swiss francs, therefore stands at over 38 percent.