Our positioning: the equity markets stagger towards the next high

The economic signals remain generally weak worldwide. However, the situation regarding various notorious areas of political tension has improved – including in the UK, where we are increasing our equity position slightly.

Stock markets still on rollercoaster ride

At the start of September, the equity markets fell by 6 percent within a short space of time – this is the sixth time since early 2018 that a downturn on this scale has taken place. And, for the sixth time, the markets recovered equally quickly. The major equity market indexes in Switzerland, the USA and also in Europe are again standing at close to record high levels.

The global economic situation has not improved. Yet there are still no indications of a recession – neither in the USA nor in Europe or Switzerland. Despite this, companies and consumers were less optimistic again last month. In the developed economies, the leading indicators for economic growth deteriorated for the ninth month in succession.

The stock markets have been much more unsettled since January 2018

The price trend of the MSCI USA since January 2016

The graphic shows the price trend of US equities since January 2016. In January 2018, there was a major downturn on the stock markets for the first time in two years. Since then, the markets have experienced ups and downs, but new record high levels have frequently been reached. The stock markets also recovered quickly from the latest downturn in the third quarter.

Compared to 2016 and 2017, the stock exchanges have been on a real rollercoaster ride since early 2018, with downturns continually followed by new record highs. The stock markets have also recovered from the latest downturn.

We also believe the political situation in the UK has improved in the short term.

Thaw in political relations in the autumn?

The political situation has taken a turn for the better. Chinese and US leaders have announced their intention to resume negotiations. The first small concessions on trade tariffs were also made. Whether the ceasefire on trade policy will last and whether this results in greater optimism amongst companies on both sides of the Pacific remains to be seen. History tells us not to celebrate progress in Chinese-US negotiations too early.

We also believe the political situation in the UK has improved slightly in the short term. This is not only because Parliament has passed a law preventing a disorderly Brexit on 31 October. For the first time in months, the chances of the UK leaving the EU in an orderly, negotiated fashion have increased due to the recent power shifts in Parliament. In light of this new situation, we regard the opportunity/risk ratio of UK investments as more positive than in previous months. As a result, we are moderately increasing our position in UK equities in our portfolios.

Defensive positioning to be maintained

Overall, we still recommend that our customers maintain an underweight position in equity investments. This cautious approach takes account of the economic and political uncertainty and the significantly greater fluctuations on the stock markets. We now also recommend moderately underweighting US equities.

As a protective measure, we advise overweighting gold investments and the Japanese yen in the portfolio. In contrast, we see opportunities in government bonds from emerging markets. These bonds denominated in US dollars have an average yield to maturity of over 6 percent. In terms of investments denominated in Swiss francs, we recommend purchasing Swiss real estate funds. In contrast to Swiss bonds, which barely yield a positive return, real estate funds pay out dividends of 2.7 percent on average.

Bond market rally halted

The mood on the equity markets brightened significantly in September. With the exception of the Asian indices, the main stock market indices are close to their record high levels again. At the same time, there was an abrupt change of mood on the bond markets in recent weeks. Long-term yields recorded the biggest rise in 18 months, ending one of the strongest rallies on the government bond market in the past 20 years. By contrast, there was little movement in the price of gold or the prices of Swiss real estate investments.

Performance of asset classes

Currencies 1 month in CHF YTD in CHF
Currencies
EUR
1 month in CHF
0.8%
YTD Year-to-date: since the start of the year in CHF

–2.7%

Currencies
USD
1 month in CHF
2.2%
YTD Year-to-date: since the start of the year in CHF
0.8%
Currencies
JPY
1 month in CHF
–0.5%
YTD Year-to-date: since the start of the year in CHF
2.2%

Equities 1 month in CHF YTD in CHF
1 month in LC YTD in LC
Equities
Switzerland
1 month in CHF
3.2%
YTD Year-to-date: since the start of the year in CHF
24.6%
1 month in LC Local currency

3.2%

YTD Year-to-date: since the start of the year in LC Local currency
24.6%
Equities
World
1 month in CHF
6.5%
YTD Year-to-date: since the start of the year in CHF
19.5%
1 month in LC Local currency
4.3%
YTD Year-to-date: since the start of the year in LC Local currency
18.5%
Equities
USA
1 month in CHF
6.6%
YTD Year-to-date: since the start of the year in CHF
22.4%
1 month in LC Local currency
4.4%
YTD Year-to-date: since the start of the year in LC Local currency
21.4%
Equities
Eurozone
1 month in CHF
7.2%
YTD Year-to-date: since the start of the year in CHF
15.9%
1 month in LC Local currency
6.3%
YTD Year-to-date: since the start of the year in LC Local currency
19.0%
Equities
United Kingdom
1 month in CHF
6.8%
YTD Year-to-date: since the start of the year in CHF
10.0%
1 month in LC Local currency
2.3%
YTD Year-to-date: since the start of the year in LC Local currency
12.8%
Equities
Japan
1 month in CHF
5.8%
YTD Year-to-date: since the start of the year in CHF
11.7%
1 month in LC Local currency
6.3%
YTD Year-to-date: since the start of the year in LC Local currency
9.3%
Equities
Emerging markets
1 month in CHF
7.4%
YTD Year-to-date: since the start of the year in CHF
8.9%
1 month in LC Local currency
5.2%
YTD Year-to-date: since the start of the year in LC Local currency
8.0%

Fixed income 1 month in CHF YTD in CHF
1 month in LC YTD in LC
Fixed income
Switzerland
1 month in CHF
–1.3%
YTD Year-to-date: since the start of the year in CHF
4.5%
1 month in LC Local currency

–1.3%

YTD Year-to-date: since the start of the year in LC Local currency
4.5%
Fixed income
World
1 month in CHF
1.3%
YTD Year-to-date: since the start of the year in CHF
7.1%
1 month in LC Local currency
–0.9%
YTD Year-to-date: since the start of the year in LC Local currency
6.2%
Fixed income
Emerging markets
1 month in CHF
3.4%
YTD Year-to-date: since the start of the year in CHF
15.4%
1 month in LC Local currency
1.2%
YTD Year-to-date: since the start of the year in LC Local currency
14.5%

Alternative investments 1 month in CHF YTD in CHF
1 month in LC YTD in LC
Alternative investments
Swiss real estate
1 month in CHF
–0.3%
YTD Year-to-date: since the start of the year in CHF
21.2%
1 month in LC Local currency

–0.3%

YTD Year-to-date: since the start of the year in LC Local currency
21.2%
Alternative investments
Gold
1 month in CHF
1.4%
YTD Year-to-date: since the start of the year in CHF
17.9%
1 month in LC Local currency
–0.8%
YTD Year-to-date: since the start of the year in LC Local currency
16.9%

Our positioning – focus on Switzerland

Liquidity TAA old TAA new
Liquidity
CHF
TAA old Tactical asset allocation: short- to medium-term positioning
5.0%
TAA new Tactical asset allocation: short- to medium-term positioning
5.0%
Liquidity
JPY
TAA old Tactical asset allocation: short- to medium-term positioning
2.0%
TAA new Tactical asset allocation: short- to medium-term positioning
2.0%
Liquidity
Total
TAA old Tactical asset allocation: short- to medium-term positioning
7.0%
TAA new Tactical asset allocation: short- to medium-term positioning
7.0%

Equities
TAA old TAA new
Equities
Switzerland
TAA old Tactical asset allocation: short- to medium-term positioning
28.0%
TAA new Tactical asset allocation: short- to medium-term positioning
28.0%
Equities
USA
TAA old Tactical asset allocation: short- to medium-term positioning
8.0%
TAA new Tactical asset allocation: short- to medium-term positioning
7.0%
Equities
Eurozone
TAA old Tactical asset allocation: short- to medium-term positioning
3.0%
TAA new Tactical asset allocation: short- to medium-term positioning
3.0%
Equities
United Kingdom
TAA old Tactical asset allocation: short- to medium-term positioning
0.0%
TAA new Tactical asset allocation: short- to medium-term positioning
1.0%
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
3.0%
TAA new Tactical asset allocation: short- to medium-term positioning
3.0%
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 income TAA old TAA new
Fixed income
Switzerland
TAA old Tactical asset allocation: short- to medium-term positioning
13.0%
TAA new Tactical asset allocation: short- to medium-term positioning
13.0%
Fixed income
World
TAA old Tactical asset allocation: short- to medium-term positioning
12.0%
TAA new Tactical asset allocation: short- to medium-term positioning
12.0%
Fixed income
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%
Fixed income
Total
TAA old Tactical asset allocation: short- to medium-term positioning
33.0%
TAA new Tactical asset allocation: short- to medium-term positioning
33.0%

Alternative investments TAA old TAA new
Alternative investments
Swiss real estate
TAA old Tactical asset allocation: short- to medium-term positioning
9.0%
TAA new Tactical asset allocation: short- to medium-term positioning
9.0%
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
7.0%
Alternative investments
Total
TAA old Tactical asset allocation: short- to medium-term positioning
16.0%
TAA new Tactical asset allocation: short- to medium-term positioning
16.0%
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