Our positioning: Caution despite encouraging first-half performance

There are growing signs of a change in leadership on the equity markets. While the “magnificent seven” have made a substantial contribution to gains in recent years, they’ve significantly underperformed the broad US stock market since the start of the year, rising by around 3 percent versus a gain of around 11 percent for the broad market.

This development reflects the current phase of the AI investment cycle. It isn’t just the level of investment that’s determining success, but increasingly its economic implementation. This is seen in the competition for large language models, which focuses on a few leading providers. Take Meta, which is expected to invest between 115 and 130 billion US dollars in 2026, yet its own AI models have so far played only a minor role in competing with market leaders. The key factor isn’t who invests the most, but who successfully monetizes these investments. For the stock markets, this is likely to lead to greater differentiation between winners and losers in the future.

Geopolitical risks remain high

Economic uncertainty is compounded by geopolitical uncertainty. The announced framework agreement between the US and Iran is proving fragile, as expected. Tensions rose again recently. Oil prices responded with significant volatility, which was a factor in long-term capital market interest rates remaining at a high level worldwide. At the same time, inflationary pressure is still high in the US, putting a significant strain on consumers’ purchasing power.

Cautious positioning remains advisable

We see the recent improvement in market breadth as a positive factor. One example is the equal-weighted S&P 500, which was able to catch up with the cap-weighted index. Meanwhile, rising earnings expectations are bolstering the stock markets, but the potential for a setback in the event of disappointment remains considerable. What’s more, the current rally is still being largely driven by the semiconductor sector. If momentum weakens, it may be more difficult for the entire market to justify the high valuations. That’s why we’re maintaining our cautious positioning, particularly in relation to US equities.

Gold and real estate funds as an anchor of stability

Gold remains an important part of the portfolios for us. Inflation has been above the US Federal Reserve’s 2 percent inflation target for the past five years and is currently at a high level. It means the precious metal remains an attractive hedge against crises and inflation.

We’re also maintaining an overweight position in exchange-listed Swiss real estate funds. After strong monthly growth of around 5 percent, prices have risen moderately again since the start of the year. Valuations have increased accordingly. However, distribution yields of over 2 percent remain attractive in the zero interest rate environment. This is underpinned by the continuing high demand for Swiss residential and commercial properties with limited supply.

Performance of asset classes

Our positioning – Swiss focus