Our positioning: The markets are celebrating the fall in inflation in the USA

We took advantage of the rapid recovery on equity markets last month to sell off European equities. Instead, we’re bulking up our US equity allocation, while remaining restrained towards equity investments overall.

The economic impact of the sharp hike in key rates over recent months will only truly be felt during the coming months.

The financial markets have been fluctuating between hope and resignation for months, primarily driven by the inflation trend. This largely determines how much more the central banks – particularly the US Federal Reserve – will raise key rates. It is hoped that interest rates will peak soon, after the sharp hikes in recent months. But it is also hoped that the economic damage caused by this restrictive monetary policy will not be too great. 

Investors’ hopes are currently being fed by recently published economic data. The economic growth figures for the third quarter showed an acceleration of growth in the US and sustained, albeit weaker, growth in the eurozone. However, above all else, the announcement of the fall in inflation in the USA for October was cause for celebration. While the decline in the overall inflation rate was expected, the drop in the core rate came as a surprise. This excludes sharply fluctuating energy and food prices and is a better indicator of the underlying inflation trend. While the equity markets have enjoyed one of their best months ever, the bond markets were also boosted by the surprise news on US inflation. The US dollar fell victim to this development, suffering its greatest setback since the start of the year. 

Underweighted equity position maintained

We do not regard last month’s rapid price gains on the equity markets as sustainable. Past experience has shown that monetary policy has a delayed impact. The economic impact of the sharp hike in key rates over recent months will only truly be felt during the coming months. While we hope that the economic consequences of this policy will be brief and mild, we don’t share the optimism found on the equity markets. That’s why we’re adopting a cautious approach to equity market positioning in the portfolios entrusted to us. 

Acquisition of US equities at the expense of those from Europe

Sharp equity market fluctuations over recent weeks have made a change in regional equity positioning necessary. We are selling European equities, but increasing the allocation of those from the US. This means that we’re cashing in on the strong gains made by European equities last month. With a two-digit inflation rate, European monetary policy has a long, restrictive path ahead. As a result, economic and monetary policy headwind may grow stronger and last longer in Europe. 

Reducing gold investments

Finally, we’ve also decided to reduce the gold position in the portfolios. This has served us well this year – gold is one of the few asset classes to generate a positive return in francs since the start of the year. But in light of the increased yields on bonds and money market investments, gold is losing its appeal. We’re taking advantage of recent price gains and realigning positioning to a neutral allocation.

Performance of asset classes

Currencies1 month in CHFYTD in CHF1 month in LC YTD in LC
Currencies
EUR
1 month in CHF
1.4%
YTD  Year-to-date: since the start of the year in CHF

–5.2%

1 month in LC  Local currency
1.4%
YTD  Year-to-date: since the start of the year in LC  Local currency
–5.2%
Currencies
USD
1 month in CHF
–3.6%
YTD  Year-to-date: since the start of the year in CHF
5.6%
1 month in LC  Local currency
–3.6%
YTD  Year-to-date: since the start of the year in LC  Local currency
5.6%
Currencies
JPY
1 month in CHF
–0.4%
YTD  Year-to-date: since the start of the year in CHF
–13.7%
1 month in LC  Local currency
–0.4%
YTD  Year-to-date: since the start of the year in LC  Local currency
–13.7%

Equities1 month in CHFYTD in CHF
1 month in LC YTD in LC
Equities
Switzerland
1 month in CHF
8.4%
YTD  Year-to-date: since the start of the year in CHF
–13.4%
1 month in LC  Local currency

8.4%

YTD  Year-to-date: since the start of the year in LC  Local currency
–13.4%
Equities
World
1 month in CHF
6.2%
YTD  Year-to-date: since the start of the year in CHF
–12.6%
1 month in LC  Local currency
10.2%
YTD  Year-to-date: since the start of the year in LC  Local currency
–17.2%
Equities
USA
1 month in CHF
5.5%
YTD  Year-to-date: since the start of the year in CHF
–12.8%
1 month in LC  Local currency
9.4%
YTD  Year-to-date: since the start of the year in LC  Local currency
–17.4%
Equities
Eurozone
1 month in CHF
14.6%
YTD  Year-to-date: since the start of the year in CHF
–16.0%
1 month in LC  Local currency
13.1%
YTD  Year-to-date: since the start of the year in LC  Local currency
–11.4%
Equities
United Kingdom
1 month in CHF
8.2%
YTD  Year-to-date: since the start of the year in CHF
–3.3%
1 month in LC  Local currency
6.0%
YTD  Year-to-date: since the start of the year in LC  Local currency
5.7%
Equities
Japan
1 month in CHF
1.7%
YTD  Year-to-date: since the start of the year in CHF
–15.2%
1 month in LC  Local currency
2.0%
YTD  Year-to-date: since the start of the year in LC  Local currency
–1.7%
Equities
Emerging markets
1 month in CHF
–3.0%
YTD  Year-to-date: since the start of the year in CHF
–21.8%
1 month in LC  Local currency
0.6%
YTD  Year-to-date: since the start of the year in LC  Local currency
–26.0%

Fixed income1 month in CHFYTD in CHF
1 month in LC YTD in LC
Fixed income
Switzerland
1 month in CHF
3.8%
YTD  Year-to-date: since the start of the year in CHF
–9.9%
1 month in LC  Local currency

3.8%

YTD  Year-to-date: since the start of the year in LC  Local currency
–9.9%
Fixed income
World
1 month in CHF
–0.6%
YTD  Year-to-date: since the start of the year in CHF
–13.6%
1 month in LC  Local currency
3.1%
YTD  Year-to-date: since the start of the year in LC  Local currency
–18.2%
Fixed income
Emerging markets
1 month in CHF
–0.5%
YTD  Year-to-date: since the start of the year in CHF
–17.4%
1 month in LC  Local currency
3.2%
YTD  Year-to-date: since the start of the year in LC  Local currency
–21.8%

Alternative investments1 month in CHFYTD in CHF
1 month in LC YTD in LC
Alternative investments
Swiss real estate
1 month in CHF
5.4%
YTD  Year-to-date: since the start of the year in CHF
–16.3%
1 month in LC  Local currency

5.4%

YTD  Year-to-date: since the start of the year in LC  Local currency
–16.3%
Alternative investments
Gold
1 month in CHF
0.3%
YTD  Year-to-date: since the start of the year in CHF
2.0%
1 month in LC  Local currency
4.1%
YTD  Year-to-date: since the start of the year in LC  Local currency
–3.4%

Our positioning – Swiss focus

LiquidityTAA old TAA new
Liquidity
CHF
TAA old  Tactical asset allocation: short- to medium-term positioning
9.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
11.0%
Liquidity
Total
TAA old  Tactical asset allocation: short- to medium-term positioning
9.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
11.0%

Equities
TAA old TAA new
Equities
Switzerland
TAA old  Tactical asset allocation: short- to medium-term positioning
23.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
23.0%
Equities
USA
TAA old  Tactical asset allocation: short- to medium-term positioning
6.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
8.0%
Equities
Eurozone
TAA old  Tactical asset allocation: short- to medium-term positioning
3.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
1.0%
Equities
United Kingdom
TAA old  Tactical asset allocation: short- to medium-term positioning
2.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
2.0%
Equities
Japan
TAA old  Tactical asset allocation: short- to medium-term positioning
2.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
2.0%
Equities
Emerging markets
TAA old  Tactical asset allocation: short- to medium-term positioning
8.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
8.0%
Equities
Total
TAA old  Tactical asset allocation: short- to medium-term positioning
44.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
44.0%

Fixed incomeTAA old TAA new
Fixed income
Switzerland
TAA old  Tactical asset allocation: short- to medium-term positioning
17.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
17.0%
Fixed income
World
TAA old  Tactical asset allocation: short- to medium-term positioning
6.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
6.0%
Fixed income
Emerging markets
TAA old  Tactical asset allocation: short- to medium-term positioning
6.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
6.0%
Fixed income
Total
TAA old  Tactical asset allocation: short- to medium-term positioning
29.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
29.0%

Alternative investmentsTAA old TAA new
Alternative investments
Swiss real estate
TAA old  Tactical asset allocation: short- to medium-term positioning
11.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
11.0%
Alternative investments
Gold
TAA old  Tactical asset allocation: short- to medium-term positioning
7.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
5.0%
Alternative investments
Total
TAA old  Tactical asset allocation: short- to medium-term positioning
18.0%
TAA new  Tactical asset allocation: short- to medium-term positioning
16.0%
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