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 - 2nd quarter 2024
The global economy continued to improve in the second quarter of 2024. However, there are initial signs of an emerging economic slowdown, especially in the USA. Following a global rise in long-term interest rates in the first quarter, regional differences became apparent in the last three months. While long-term interest rates in the US fell slightly or stagnated, in connection with the European elections in June 2024 there were some sharp interest rate movements in Europe. German government bonds were in demand for security reasons, while French government bonds were subject to risk premiums.
Short-term interest rates fell over the course of the second quarter. The background to this is the positive trend in inflation figures, which has prompted central banks to start the cycle towards lower key interest rates. Both the European Central Bank and the Swiss National Bank lowered their key interest rates by 25 basis points in June.
The global equity markets continued their positive trend in the second quarter, albeit to a much lesser extent compared to the first quarter. The asset classes of gold, commodities and alternative investments also continued to expand their gains. At the end of June, after the Chinese central bank reduced its recent high demand for gold, its price consolidated at a higher level. In terms of currencies, the US dollar strengthened against the euro and the Swiss franc. Compared to the euro, the Swiss franc has recently gained in value, but on an annualised basis it marks a loss of just under four per cent.
Current situation assessment & outlook for the next 6 to 12 months
The economic environment will continue to improve until the fourth quarter of 2024, after which global growth momentum will steadily slow. Inflation will remain at a slightly higher level between two and three per cent.
Our leading indicators suggest that short-term interest rates will continue to fall, while long-term interest rates will remain stable or slightly rise. Yields on corporate bonds remain attractive due to the average one per cent advantage over government bonds. The continued optimistic investor sentiment for equities calls for caution and may lead to price declines.
This applies to the US equity market, which shows an excessive upward deviation in the long-term trend channel and a high valuation (price/earnings ratio). Europe remains the favoured equity region with a fair valuation compared to the USA and a development close to the long-term trend growth line and offers opportunities for a further price increase.
The rise of the price of gold coupled with a simultaneous rise in real interest rates over the course of 2024 will result in increased correction potential if the historically strong, negative correlation resumes.
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.
