Situation Assessment & Outlook for the next 6 to 12 months
Our short-term assessment of the development of the financial markets and asset classes.
Review - 3rd quarter 2024
Signs of a global economic slowdown have become increasingly evident, with much of the recent data falling short of expectations. At the same time, inflation figures continued to fall in the direction of the central banks’ target of 2 per cent. In response, central banks have either initiated (in the US) or extended (in the Eurozone and Switzerland) interest rate cuts, aiming to stimulate growth by lowering borrowing costs for businesses and households. The market has already priced in further cuts in the short-term interest rate. Long-term interest rates also fell slightly, boosting bond prices.
After a strong first half of the year, equities continued their upward trajectory in the third quarter of 2024, despite heightened volatility driven by emerging economic concerns. These fluctuations were followed by a rally in late September, spurred by the rate cuts and expectations of further monetary easing. As a result, certain stock indices reached new record highs. In a regional comparison, the US continues to outperform both Europe and emerging markets.
Gold also hit an all-time high in Q3 2024, driven by concerns over rising government debt, falling long-term interest rates, and increased demand from emerging markets. In the currency market, the euro strengthened against the US dollar, while the Swiss franc appreciated against both the euro and the US dollar.
Current situation assessment & outlook for the next 6 to 12 months
The peak in the economic cycle has been reached, and the decline in global growth momentum is expected to continue into the first quarter of 2026. This economic weakness will lead to lower inflation figures and stimulating key interest rate cuts by central banks. In the Eurozone, long-term interest rates are expected to rise slightly, while they will remain stable in the US.
Due to the record levels of the stock indices, investor sentiment is in the optimistic to euphoric range, which is a warning signal. In connection with the expensive valuation (price-earnings ratio) of American stocks and the increasing weight of a few US technology companies, the risk of price fluctuations and declines increase. There is little to suggest that the upcoming US presidential election in November will influence the stock markets. Even geopolitical events, such as the current conflict in the Middle East or the ongoing war between Russia and Ukraine, generally only have a short-term and therefore minor impact on the financial markets. Taking the S&P 500 stock index as an example, the average decline within 19 days of an event occurring is less than 5 per cent.
Finally, a look at currencies does not suggest any major changes. As a result of three interest rate cuts, the potential for further monetary easing in Switzerland has diminished compared to the US and the Eurozone, which should support the Swiss franc.
Disclaimer - legal notice
This publication was produced by the Investment Office of the Colin&Cie Group. The information and opinions contained in this document are based on sources we believe to be reliable. However, we cannot guarantee the reliability, completeness or correctness of these sources. All information and quoted rates are only up-to-date at the time of this publication and are subject to change at any time without notice. The content is based on numerous assumptions made by the Colin & Cie Group. It should be noted that different assumptions can lead to materially different results. The forecasts and assessments are only current at the time this publication is prepared and can change at any time without prior notice. Past performance of an investment is not a guarantee of future results. Certain investments can experience sudden and substantial losses in value. This information and views do not constitute a solicitation, offer or recommendation to buy or sell investment instruments or to carry out any other transactions. We recommend interested investors to consult their personal advisor before making decisions on the basis of this document so that personal investment goals, financial situation, individual needs and risk profile as well as further information can be duly taken into account as part of a comprehensive consultation. The information contained in this publication is marketing material that is distributed for advertising purposes only.
