The upward trend in long-term interest rates continued last month, particularly in the USA, where the economic policy measures anticipated from Trump were likely to have been a factor. In Switzerland, capital market interest rates fell further from their already low level.

Indexed performance of government bonds in local currency

100 = 01.01.2024

The persistent downward trend in government bonds that began in mid-September continued last month in both the USA and the eurozone. Following Donald Trump’s clear election victory, losses were particularly heavy in the USA. The second policy rate cut of 25 basis points in the US, which came the day after the election, failed to halt this trend. Under Trump's new presidency, market participants look set to expect a further rise in inflation and a significant increase in debt. By contrast, Swiss bonds recorded price gains due to falling capital market interest rates.

Trend in 10-year yields to maturity

In percent

The rise in long-term interest rates observed since mid-September continued last month in both the USA and the eurozone. In the United States, yields to maturity on 10-year government bonds rose particularly sharply after the election of Donald Trump, by around 20 basis points to over 4.4 percent. Month-on-month, US yields to maturity ultimately rose almost twice as much as in Germany, for example. 10-year yields to maturity on Swiss government bonds, by contrast, continued to fall and currently stand at just over 0.3 percent.

Credit spreads on corporate bonds

In percentage points

The decline in risk premiums on corporate bonds continued last month, particularly in the US and on low-quality corporate bonds. In the US, spreads have been at historic lows since 2000. They were only lower before the financial crisis. This means the US corporate bond market is showing no concerns of recession at the moment, and there are also few signs of them in Switzerland and the eurozone.

The US stock markets reacted to the Republicans’ clear election victory in the United States with significant price gains. In Europe and Switzerland, on the other hand, the stock markets are likely to have suffered on fears of an expected protectionist US economic policy.

Indexed stock market performance in Swiss francs

100 = 01.01.2024

Donald Trump’s return as the 47th President of the United States was greeted with skyrocketing prices on the American stock markets. On election day itself, they rose by over 4 percentage points, contributing significantly to a positive monthly performance. Market participants are evidently hoping for an economic boost from the measures announced by Trump. By contrast, equity markets outside the US mostly declined, likely weighed down in particular by concerns about protectionist measures expected from the new president.

Momentum of individual markets

In percent

Momentum on the equity markets suffered another setback last month. The decline was particularly pronounced on the Chinese stock market, which had soared in September following the announcement of an economic stimulus package, rising by almost 25 percentage points. In October, however, there was an increasing sense of disillusionment on concerns that truly tangible fiscal support measures will come to nothing for the time being. As a result, the Chinese equity market again lost some of its gains, leading to a significant decline in momentum, although it remains in positive territory. The most positive momentum is currently in the US, in particular due to the strong price gains of the past month.

Price/earnings ratio

Last month, price/earnings ratios (P/E ratios) rose only in the US, while they fell significantly in both Switzerland and in emerging markets. This is likely mainly due to the differing performance of the equity markets. Share prices in the US have risen significantly, while they have fallen appreciably in Switzerland and emerging markets, especially China.

Most Swiss real estate funds trended sideways last month, maintaining their high increases in value so far this year. 

Indexed performance of Swiss real estate funds

100 = 01.01.2024

Exchange-listed Swiss real estate funds saw no major changes in value last month. They remained at the high level they had reached at the end of September following the announcement by the Swiss National Bank (SNB) that it would cut its policy rate for the third time in a row. The small changes in recent weeks are likely due to Swiss capital market interest rates stagnating at a low level, and, unlike US capital market interest rates, not being susceptible to any increase. Annual performance of Swiss real estate investments therefore remains above 10 percent. 

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

In percent

Due to the moderate change in the value of real estate funds, the premium that investors usually have to pay on the stock exchange compared to the actual net asset value (NAV) of properties has hardly moved. These premiums remain high by historical standards. Higher premiums have only been seen during periods of negative capital market interest rates. However, no such period is expected at present.

3-month SARON and 10-year yields to maturity

In percent

The unusual situation in which long-term interest rates are lower than short-term money market rates persists in Switzerland, as in many other European countries and the USA. Under normal circumstances, the opposite would be expected, as investors usually demand higher compensation for long-term lending of capital and the higher risk that this lending entails compared to short-term lending. However, market participants are working on the assumption that the Swiss National Bank (SNB) will again cut key policy rates significantly over the course of next year, which would push short-term money market rates back below the current level of long-term capital market interest rates.

Currencies

The US dollar gained significantly in value following Donald Trump’s election to the presidency and is now more than 3 percent up on a trade-weighted basis. The Japanese yen, on the other hand, remained weak.

^{Source: Allfunds Tech Solutions}

As in the previous month, the US dollar gained significantly in value. Following Trump’s re-election in particular, the dollar strengthened by over 3 percent on a trade-weighted basis. This is likely to be due in particular to expectations that Trump’s economic policy might favour the dollar. The dollar remained strong even after the US Federal Reserve (Fed) cut its policy rate by a quarter of a percentage point. The Swiss franc also lost value against the US dollar, but remained stable against the euro.

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

Gold

Gold reached a new all-time high of just under 2,800 US dollars per troy ounce at the end of October, but then fell significantly. 

Indexed performance of gold in Swiss francs

100 = 01.01.2024

At almost 2,800 US dollars per troy ounce, the price of gold reached a new all-time high at the end of October. The price then fell significantly by over 7 percent. The reasons for this are likely to be both the strong US dollar and higher interest rate expectations, which are again increasing the opportunity cost of holding gold. Gold traded in Swiss francs also declined in value after the recent highs, but still made gains compared to the previous month due to the weakness of the Swiss franc.