Our positioning: When certainties crumble

Since mid-November, the global equity markets have recouped a large part of their losses from the first half of November. Many have surpassed their record highs at the end of October. On a positive note, the rally wasn’t driven solely by tech. Other areas such as healthcare also contributed to the upward trend last month. Although the US tech sector did make gains, there were also significant price setbacks.

AI competition heats up

There’s growing uncertainty as to who will be the winners in the artificial intelligence race. For a long time, the answer seemed clear: Nvidia would dominate the chip market and OpenAI would lead the way in large language models. But that certainty is looking shaky. Alphabet, for example, has succeeded in developing a language model that surpasses OpenAI’s in key areas – and with self-produced chips that are far cheaper than Nvidia’s. This shift has had an impact on the stock markets. Nvidia’s shares have fallen by over 10 percent since the end of October.

This development shows there will be clear winners and losers in the artificial intelligence race and that the balance of power can shift faster than expected. It’s precisely why we’re remaining cautious towards the highly valued US stock market. The high valuations of many tech stocks are based on an assumption of long-term dominance with high profit margins. But recent developments underscore just how fragile such positions can be.

On the other hand, global value stocks have far cheaper valuations. We’re maintaining our overweight in this position, which has paid off recently. Value stocks benefit from broader diversification, defensive positioning and lower dependence on highly valued individual stocks.

Gold continues to shine

Gold performed well again in the volatile market conditions. Measured in Swiss francs, the gold price climbed by almost 2 percent last month, reaching October’s highs again. With an annual return of over 40 percent in Swiss francs, gold remains the most successful asset class of the year. We also see further potential for Swiss real estate. Despite the economic slowdown, real estate funds offer an attractive distribution yield compared to money market investments.

Emerging market investments impress

Emerging market investments remained broadly stable over the month. Although equities fell slightly in mid-month, the US dollar weakened again in the second half of the month, which contributed to a share price recovery. This year has clearly underscored the positive correlation between a weak dollar and strong performance by emerging market equities. As the US dollar remains overvalued on a trade-weighted basis despite an annual loss of around 10 percent, we’re maintaining our overweight in emerging market equities and bonds.

Performance of asset classes

Our positioning – Swiss focus