Market overview: Successful start

Following their significant rise until mid-January, long-term interest rates in the industrial nations fell again slightly last month. This led to price gains on the bond markets. 

Indexed performance of government bonds in local currency

100 = 01.01.2025

January initially saw a sharp rise in long-term interest rates, causing losses on the bond markets, before a turnaround followed in mid-month. Further monetary easing in Europe and the UK and the decline in US core inflation in December are likely to have contributed to the reversal. In the short term, however, this was again at risk, as the 3.3  percent rise in US core inflation for January fuelled renewed concerns about inflation. Nevertheless, the fall in producer prices in the USA provided some reassurance. Interest rates in Europe and the USA fell month-on-month, helping government bonds to make gains.

Trend in 10-year yields to maturity

In percent

The strong upward trend in long-term interest rates seen since mid-December weakened appreciably last month. Yields to maturity in both Europe and the USA are down by around 25 basis points. Yields to maturity on 10-year US government bonds are now back at around 4.5 percent. This is the same level seen in mid-December before the US Federal Reserve’s (Fed) far more cautious statements about possible policy rate cuts. Notwithstanding this trend, 10-year Swiss government bonds are yielding 0.4 percent, the same as in the previous month. They were temporarily lower at 0.3 percent, but have recently returned to 0.4 percent as the core inflation rate has risen.

Credit spreads on corporate bonds

In percentage points

Credit spreads on corporate bonds remain at historically low levels. So far, the looming trade conflict with the USA appears to have had no impact on companies’ refinancing conditions, and fears of recession continue to play no role on the market at present.

After some initial caution, the equity markets had a successful start to the new year. The stock markets in Europe and Switzerland in particular rose sharply. 

Indexed stock market performance in Swiss francs

100 = 01.01.2025

Following perceptible headwinds on the stock markets amid rising capital market interest rates as the year began, stock markets were far more optimistic again last month. The European and Swiss markets in particular made significant gains. Since the beginning of the year, their value has risen by 10 percent and has been unaffected by the Trump administration’s looming trade conflict. In Switzerland, index heavyweights Novartis, Roche and Nestlé – which had long held back price performance on the domestic market – made significant gains last month, thanks in part to good corporate numbers. 

Momentum of individual markets

In percent

The stock markets’ successful start produced an upturn in momentum on the stock markets. Momentum on most markets is now back in positive territory. This trend is particularly clear on the Chinese stock market, where growth in momentum was strongest. This is likely to be related to the breakthrough of Chinese startup DeepSeek in artificial intelligence, as tech-oriented stocks in particular recorded the biggest price gains on the Chinese market.

Price/earnings ratio

Price/earnings ratios (P/E ratios) rose significantly over the past month, particularly in emerging markets and Switzerland. This is due to the very positive momentum on these stock markets recently. Both markets gained around 10 percent, while earnings performance remained relatively stable.

Swiss real estate funds recovered slightly following a period of weakness in mid-January.

Indexed performance of Swiss real estate funds

100 = 01.01.2025

After falling slightly in value in January, Swiss real estate funds have recently recovered to some extent. Real estate fund performance has been somewhat more volatile this year, and, unlike the previous year, has lagged behind that of the stock markets. Nevertheless, real estate fund prices are around 2 percent above their year-opening level.  

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

In percent

The positive performance of exchange-listed Swiss real estate funds led to a slight increase in the premium that investors usually have to pay on the stock exchange versus the actual net asset value (NAV) of properties. By historical standards, these premiums therefore remain high. Higher premiums have only been seen during periods of negative capital market interest rates. 

3-month SARON and 10-year yields to maturity

In percent

Yields to maturity on 10-year Swiss government bonds saw little change month-on-month and are currently at 0.4 percent. Long-term interest rates and the three-month SARON are therefore almost at the same level. This could possibly change in March. Despite slightly higher core inflation, market participants are currently working on the assumption that the Swiss National Bank (SNB) will lower the policy rate by 25 basis points, which would push short-term money market interest rates below the current level of long-term capital interest rates. 

Currencies

The US dollar’s rally failed to continue this month. The Japanese yen rose significantly against the US dollar. 

^{Source: Allfunds Tech Solutions}

The US dollar failed to continue last month’s upward trend. Over the month, the US dollar lost around 2.5 percent on a trade-weighted basis. At over 3 percent, the Japanese yen recorded the strongest appreciation against the US dollar. The yen’s rise is likely to have been triggered by the ongoing normalization of the Japanese central bank’s monetary policy. Overall, however, the US dollar remains highly valued on a trade-weighted basis measured by purchasing power parity.

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

Gold

The gold price, measured in Swiss francs, reached a new high 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

The gold price reached new highs several times last month and climbed above 2,600 francs per troy ounce for the first time. Since the beginning of the year, the precious metal has already gained more than 10 percent in value. One of the reasons for this rapid rise is likely to have been the fear of Trump’s tariff plans, which probably increased demand for gold as a safe haven.