Our positioning: Differing realities on the financial markets

Last month was shaped by two competing forces: a powerful share price rally fuelled by euphoria surrounding artificial intelligence, and a bond market under pressure from rising inflation expectations. While the war in the Middle East yielded little tangible progress and the Strait of Hormuz remained largely closed, the equity markets celebrated one of the strongest months in years.

Tech stocks on the up

The S&P 500, the US leading index, hit a new all-time high several times during the month, but it was emerging market equities that performed strongest once again. Taiwan and South Korea stood out as they are most closely integrated into the global semiconductor value chain, and have gained around 70 percent in Swiss francs since the start of the year. In the USA, the strong monthly return was sustained by an exceptionally strong reporting season: earnings growth in the S&P 500 stands at 28 percent year-on-year, the highest level since the COVID–19 recovery. Growth in the tech sector was even stronger, at around 50 percent. Stocks such as Intel and AMD have made year-to-date gains of more than 100 percent, underscoring the euphoria in the AI investment cycle. By contrast, European equities have lagged behind and are only just in positive territory. Despite the encouraging stock market performance, the situation on the bond markets remains challenging. Persistently high energy prices, despite relative calm on the conflict front, are continuing to drive inflation expectations. In the USA, 10-year government bonds are currently yielding over 4.5 percent, which is around 60 basis points higher than at the end of February before the outbreak of conflict. Market expectations have fundamentally changed in Europe, too: while the markets did not anticipate any changes to policy rates at the start of the year, they now expect several interest rate hikes.

Gold trending sideways

Gold hasn’t fully recovered from the sell-off in mid-March and is currently trending sideways. Rising interest rates and a relatively strong US dollar are creating short-term headwinds. However, long-term recovery drivers remain intact and gold continues to fulfil its role as a stabilizing factor in the portfolio.

Cautious positioning remains advisable

In light of persistently high energy prices, rising inflation expectations and subdued consumer confidence, we’re maintaining our cautious stance. We’re continuing to focus on global value stocks, which are more attractive than US equities, and are maintaining an overweight position in emerging market equities and Swiss real estate funds.

Performance of asset classes

Our positioning – Swiss focus