After market turmoil in early August, which mainly affected the stock markets, a strong recovery was staged. This was so impressive that, by the end of August, the equity markets had almost returned to their highs of mid-July. They came under renewed pressure in early September owing to persistent economic concerns, but this setback was once again followed by an upturn. While the losses were not fully recouped, it seemed like a storm in a teacup.

Persistent economic concerns are weighing on the markets

However, the situation has changed in many ways since mid-July. Although a very optimistic outlook prevailed during the first six months of the year when even bad economic news couldn’t dampen the mood on the financial markets, that has all changed now. Economic concerns are now really weighing on the financial markets again. This is reflected in both the latest reactions of the stock markets and the fact that they are struggling to build on the momentum of the first half of the year.

More realistic expectations of tech stocks

Euphoria surrounding companies involved in or benefiting from the rise of artificial intelligence appears to be gradually waning, too. In mid-July, the share price of the US chip manufacturer Nvidia still stood at a high of 135, achieving growth of over 170 percent in the year to date. Its price has now dropped to below 120, which is down by 10 percent. While annual performance is still impressive, growth momentum has weakened considerably. In turn, expectations of tech stocks are gradually becoming more realistic. Companies holding monopoly-like market positions are inevitably being targeted by rivals and the competition authorities. The latter stepped up their activities last month. In early September, for example, the US authorities extended their investigations into Nvidia’s market power. The start of further anti-trust proceedings by the USA against Google and recent EU rulings against Google and Apple underline this trend. In April, we warned that the extremely high expectations of tech stocks aren’t sustainable long-term and underweighted this position on that basis. We’re maintaining this positioning.

Japanese yen shows further upward momentum

The picture has also changed for currencies. The continued gloomy economic outlook weighed on the US dollar last month. After making strong gains in the first half of the year, its value has fallen sharply of late and against the Swiss franc it now stands at the same level as at year-opening. By contrast, the Japanese yen is continuing its upward trend. It briefly broke through the 140 mark against the US dollar and also made gains against the stronger Swiss franc. Inflation is still at over 2 percent, which is high for Japan, suggesting monetary policy may be tightened again. Recent comments by a Bank of Japan policy board member fuelled expectations of interest rates even being raised this year, bolstering the yen’s upward momentum. Given this positive momentum and the yen’s continued significant undervaluation, we’re maintaining our overweighted position in this currency and our underweighting in the US dollar.

Performance of asset classes

Our positioning – Swiss focus