What a summer it’s been so far! Hot days with record temperatures were followed by sweltering nights, when we cheered, rejoiced and finally suffered with our national football team after they were unfortunately eliminated in the World Cup quarter-final against Argentina. It wasn’t always easy to keep a cool head, both literally and metaphorically.
The same was true on the financial markets. No sooner had the parties to the Middle East conflict signed a peace agreement than the war flared up again. The ongoing blockade of the Strait of Hormuz is weighing on global trade and hampering the supply of goods in emerging markets. This is fuelling concerns over the global economy – at a time when inflation has risen sharply again. It’s particularly pronounced in the US, where inflation remains well above the Fed’s inflation target. Kevin Warsh stepped into his role as the new Chairman of the US Federal Reserve in an already challenging environment. His first official actions were enough to shift market interest-rate expectations from a cut to a rise within a few weeks.
Suddenly, even the supposed winners of the past few years could no longer be relied upon. It was the very US tech stocks that had set the pace on the equity markets in recent years that began to falter. Expectations resting on these companies are now so high that even outstanding quarterly results are barely rewarded. The stocks of computer chipmakers were hit particularly hard. Even minor disappointments were met with significant price losses.
That said, most equity markets posted strong gains in the first half of the year. Our customer portfolios performed very encouragingly and generated first-half returns that would otherwise be expected for a whole year. They also fared significantly better on average than the competition. This underscores the value of a broad-based investment strategy, especially in an environment characterized by surprising twists. The above-average performance isn’t based on a single correct forecast, but on a strategy that’s orientated towards different market trends from the outset.
Such a strategy also requires repositioning wherever opportunities and risks change significantly. For example, we remain cautious about US equities. While the development of the overall market is shaped by a handful of tech groups, each new record high also brings greater potential for a setback. By contrast, we see gold as more attractive. During times of political and economic uncertainty, the precious metal has proven time and again to be a reliable store of value time, which is why we’re maintaining an increased allocation. Swiss real estate also remains overweighted, supported by solid structural demand.
