Our positioning: Greater confidence allows neutral equity allocation

Performance on the financial markets was encouraging last month. Equity markets rose significantly, while the bond markets also made gains, bolstered in particular by the strong reporting season. In the USA, company revenues rose by 15 percent year-on-year, the strongest growth seen since the end of 2021. The growth was also broadly based, with all sectors reporting rising revenues, and five of them in the double digits. Growth was strongest in the energy sector, followed by the tech sector with a hefty rise in revenues of around 36 percent. The reporting season was also impressive in Europe, with revenue growth of around 10 percent.

Reporting season allays fears about AI

The strong corporate results came as a relief after the pressure on the tech sector, particularly at the end of July. There had been doubts as to whether the heavy investment in artificial intelligence would translate into proportionately higher revenues and profits. The impressive figures from Amazon and Microsoft gave important answers to this question, showing that the high levels of investment are already being matched by strong growth in revenues and profits, at least among the leading tech companies. Since the publication of their quarterly figures, the leading US index has risen by more than 6 percent to reach new highs.

US equities back to neutral

The performance of the economy is also giving us greater confidence in the US stock market. While the US economy has indeed cooled off in recent months, the slowdown is exactly what continues to create the conditions for a subsequent recovery. Meanwhile, various company sentiment indicators have improved, and the easing of price pressure has reduced the likelihood of any further tightening of monetary policy. Historically, higher-risk assets such as shares have performed particularly well when the US economy has picked up again following a period of weakness.

Valuation is now also less of an argument against US equities. While share prices are trading at high levels, profit expectations have also risen significantly, so that despite the recent price gains, valuations have actually fallen slightly. Compared with the past ten years, they are now again closer to their historical average. Against this backdrop, we’re raising our equity allocation and completely closing our underweight in US equities. 

Swiss real estate and gold continue to serve as a stabilizing additions

We continue to see exchange-listed Swiss real estate funds as attractive. Persistently low interest rates in Switzerland are a particular argument in their favour. With distribution yields of around 2 to 3 percent, real estate funds continue to offer an attractive yield advantage over Swiss government bonds. At the same time, the fundamentals on the Swiss real estate market remain supportive, with scarce supply and robust demand.  

We’re also maintaining our overweight in gold. The precious metal achieved a significant breakout last month. The gold price gained more than 8 percent, bolstered by various factors, including growing confidence that the US Federal Reserve doesn’t need to further tighten its monetary policy. At the same time, high US government debt, geopolitical uncertainties and the demand for a portfolio stabilizer remain key arguments in favour of gold. Particularly in an environment of heightened political and fiscal risks, we believe the precious metal continues to be a sensible, stabilizing addition to the portfolio.

Performance of asset classes

Our positioning – Swiss focus