The USA remains the land of dreams and the dollar is still the world’s leading currency. There’s no doubt about that. But there is a saying: “When Wall Street sneezes, the rest of the world catches a cold.” That still holds true in 2024, and is clearly shown by looking at the stock market in America and the US dollar.
There was boundless optimism at the start of the year. The US dollar even made strong gains against the Swiss franc. Demand for tech stocks on the NASDAQ was almost unprecedented. The economy didn’t slow down despite all the gloomy predictions. Just four months into 2024, the US dollar had risen from 84 to 92 centimes. That’s an impressive gain of almost 10 percent. And tech stocks climbed by over 12 percent in US dollar terms during the same period. Combined, this produced a paper profit of over 25 percent. But that wasn’t all. Share prices continued to rise until early July, and paper profits rose to 35 percent.
The euphoria of spring and summer in the USA has now evaporated. After sunshine comes the rain. Economic concerns are taking hold, and the stock market is also struggling to resume its upward trend. The US dollar even dropped back to its year-opening level, while paper profits for Swiss investors have halved.
This development is due to a far gloomier economic outlook and the realization that even record profits, such as those posted by chip manufacturer Nvidia recently, can no longer meet the expectations of the financial markets. Added to that, uncertainty over the outcome of the US presidential election is increasingly weighing on the market.
The race for the White House is wide open at the moment. From an investors’ perspective, the alternatives are not particularly inspiring, although loyalties are clearly divided in Switzerland and Europe. On one hand, we have an elderly gentleman who is spinning yarns about cats and dogs and whose rash decision-making is a cause for concern. And, on the other, a woman whose election campaign is based on the less than thrilling prospects for the economy of tax hikes, limiting price rises and a bigger state.
Yet, stock markets are only influenced by political events over the long term in extreme cases. Claims that presidents of one party are better for the stock market than the other remain unproven. For example, the US stock market has gained by over 65 percent under President Biden, while climbing by “just” 55 percent during Donald Trump’s term in office.
Given the slowdown in the US economy, there are concerns that the combined increase of more than 150 percent over the two presidential terms cannot be sustained. It’s interesting to note that nominal national income has “only” risen by 50 percent over the same period. That doesn’t augur well for the dollar or stock market. Dreams do still seem better than reality.
