Market overview: Divided picture

Long-term US interest rates fell amid renewed fears of recession, primarily in response to the Trump administration’s economic policies. At the same time, capital market interest rates in the eurozone rose significantly as defence and economic stimulus programmes were announced.

Indexed performance of government bonds in local currency

100 = 01.01.2025

The picture on the bond market was mixed last month. While US government bond prices continued to rise, the European markets registered losses. In the USA, a renewed focus on concerns about recession, partly in response to the Trump administration’s economic policies, is likely to have contributed to falling interest rates and the resulting rise in bond prices. Conversely, the eurozone’s significant losses are likely related to the recent economic policy measures – in particular the future German government’s planned 500 billion euro economic stimulus programme and the EU’s 800 billion euro armaments programme. Swiss government bonds were also affected by this development, and suffered losses.

Trend in 10-year yields to maturity

In percent

Long-term capital market interest rates in the USA fell significantly last month. Whereas the yield on 10-year government bonds stood at 4.5 percent in mid-February, it is now at 4.3 percent. Fears of recession associated with weaker consumer data and the new US government’s economic policies are likely to have contributed to this development. Conversely, we are seeing the opposite trend in the eurozone and Switzerland. Yields to maturity have risen sharply following the announcement of huge economic stimulus packages by the EU and the incoming German government,

Credit spreads on corporate bonds

In percentage points

Credit spreads on corporate bonds in the eurozone and Switzerland continued to fall last month. By contrast, US corporate bonds rose significantly for the first time, a development that likely reflects increased fears of recession in the USA.

The successful start to the year was clouded in the USA last month as concerns resurfaced about a possible recession. Conversely, European stock markets performed well – largely due to the defence and economic stimulus packages announced by the EU and the incoming German government.

Indexed stock market performance in Swiss francs

100 = 01.01.2025

The divided picture on the bond markets is also reflected on the stock markets. US stock market prices fell so sharply last month that they are now below the level seen in early November 2024. The price gains on the US stock market that accompanied the rally following Trump’s election have been wiped out. By contrast, both European and Swiss stock markets held up well. Emerging markets also performed solidly, helped by the strength of the Chinese stock market. In a portfolio denominated in Swiss francs, however, this still had a negative impact given the strength of the franc.

Momentum of individual markets

In percent

The change in mood on the US stock markets last month is reflected in its momentum, which is now clearly negative in the USA. Conversely, European stock markets maintained and even built on the previous month’s positive momentum. The strongest momentum is currently on the Chinese stock market. It has been on a high since the breakthrough of Chinese company DeepSeek in artificial intelligence, and was likely shored up even more recently on hopes of fiscal policy measures.

Price/earnings ratio

The performance of price/earnings ratios (P/E ratios) over the past month has also been mixed. Worldwide, the P/E ratio fell considerably, while P/E ratios in the emerging markets and Switzerland continued to rise. These trends are largely due to the performance of share prices. While the global equity market fell as a result of weaker US stocks, the European and Chinese equity markets rose.

Swiss real estate funds fell in value slightly last month and are now only just above their year-opening level.

Indexed performance of Swiss real estate funds

100 = 01.01.2025

Swiss real estate funds were again volatile this month. Over the course of the month, real estate funds fell slightly in value, likely due in part to the recent sharp rise in capital market interest rates in Switzerland. Following this weaker month, real estate fund prices are only slightly above their year-opening level.

Premium on Swiss real estate funds and 10-year yields to maturity

In percent

The negative performance of exchange-listed Swiss real estate funds led to a slight decrease in the premium that investors usually have to pay on the stock exchange versus the actual net asset value (NAV) of properties. A key driver of this development is likely to have been the sharp rise in capital market interest rates in Switzerland. Nevertheless, premiums remain at a high level and above the historical average.

3-month Saron and 10-year yields to maturity

In percent

Yields to maturity on 10-year Swiss government bonds rose significantly last month. Still at 0.4 per cent the previous month, they are now yielding over 0.7 percent again. This means long-term interest rates are again somewhat clearer above the 3-month Saron. This difference is likely to widen further as market participants have currently priced in a policy rate cut by the Swiss National Bank (SNB), despite slightly higher core inflation.

Currencies

The correction in the US dollar continued this month. Both the euro and the Japanese yen made significant gains against the US dollar.

Source: Allfunds Tech Solutions

The US dollar came under further pressure this month, likely due to ongoing concerns about Donald Trump’s trade policies and renewed worries about the economic situation in the USA. Over the month, the US dollar lost around 4 percent on a trade-weighted basis. The euro gained significantly against the US dollar on the back of the economic stimulus package announced. The Swiss franc also performed strongly against the US dollar last month, rising by 2 percent. By contrast, the Swiss franc lost over 1 percent against the euro. 

^{Source: Allfunds Tech Solutions, Coin Metrics Inc}

Gold

The gold price, measured in Swiss francs, again reached a new high last month and has risen by more than 10 percent since the beginning of the year.

Indexed performance of gold in Swiss francs

100 = 01.01.2025

Demand for gold as a safe haven is also likely to have led to the precious metal reaching new highs last month. Although the rally stalled somewhat at the beginning of March, it then continued. Gold remains strong, and has risen almost 10 percent in value since the beginning of the year.