On the whole, 2024 was an appealing year for investors

Despite phases of volatility, 2024 can be considered an appealing year for investors by historical standards. Standing out during this period were the solid performances of gold and US equities, which can be linked to the geopolitical tensions on this side of the Atlantic, the better-than-expected financial results of US companies and gold purchases by central banks. A preference for US and Swiss equities and especially for global quality equities in general – particularly over Eurozone equities – could yield interesting prospects in the medium to long term.

In recent times, global economic data has been less synchronised than in the past. While the US economy appears to be relatively robust, there is increasing economic uncertainty in Europe, also in part due to political tensions. Uncertainty about the future German government and its economic policy as well as the risks related to the French debt situation and the French budget deficit are all playing a central role here. There are mainly mixed economic signals coming out of China and other emerging markets, with some of the important Chinese economic data being able to benefit from the economic stimuli announced in November. The Swiss economy appears to be performing better than that of the Eurozone, with the situation in the Eurozone – particularly in Germany – currently requiring close monitoring. An improvement in the Eurozone economy would prove beneficial to Switzerland. 
 

Equities

Over the past few weeks, the global equity markets have profited from predominantly positive trends. On the one hand, US equities were given a boost by the results of the US elections, as market participants expect corporate taxes to remain at a low level or to even fall following the Republicans’ much clearer-than-expected victory, which empowered US equities more than other equity markets. On the other hand, the financial results posted by US companies were robust and better than those of companies from other countries and regions, although some did exceed analysts’ expectations. Interestingly, there now appear to be more differences in the results between the sectors and between companies in the same sectors than in previous market phases. This means that it is probably more important to correctly select individual shares or good companies now than it was in the past. It therefore generally makes sense to focus on high-quality equities. These equities are referred to as “high-quality equities” due to them being well known for having a good track record or a healthy total return in a long-term comparison with the global equity index, are characterised by a robust profitability based on the return on equity as well as by a relatively low level of debt. The final factor could become important if interest rates were to fall at a slower-than-expected rate or if the trend towards rising government debt and overall debt in the global economy persists. 

Commodity markets could continue to fluctuate massively in the coming months.

Gérard Piasko, Chief Investment Officer

Bonds

The trends in bonds were recently influenced by an increase in divergences. In Switzerland, the downward trend in Swiss inflation – which was even more pronounced than had been expected by the consensus – supported Swiss bonds, the performance of which provided a positive surprise to many market participants in 2024. However, there has been a slight upward trend in bond yields and market interest rate volatility in the US following the Republicans’ election victory. This can be attributed to the market believing there to be greater risk in an increase in US economic growth due to taxes remaining low and to the potential for higher inflation due to greater growth in demand and the likelihood of higher tariffs. Accordingly, market participants priced in fewer US key interest rate cuts than before the US elections. European bonds outside of Switzerland trended differently from one country to the next, with French bonds delivering a weaker performance. All in all, the additional yields of corporate bonds versus government bonds around the world have been declining for many months and credit spreads are narrowing. We therefore also recommend giving greater consideration to high-quality corporate bonds. We are persisting with our global preference for higher credit quality, i.e. we prefer investment-grade bonds over high-yield bonds. 
 

Currencies

Following the unexpectedly clear victory of the Republican’s candidate in the US presidential elections, Donald Trump, the US dollar benefited massively, as the financial markets are pricing in the increasing likelihood of high import tariffs for goods from the Eurozone and other regions, which helped the greenback to gain ground on other currencies, particularly the euro, the Japanese yen and the Chinese yuan. We are now left waiting to see what will actually be implemented, which means there could be further changes in currency volatilities. Communication from central banks, especially the US Federal Reserve and the European Central Bank, is likely to be particularly important in the coming weeks and months. 

Commodities

2024 turned out to be the year of gold. Despite some consolidation in recent months, gold delivered a shining performance compared to cash and bonds as well as to other commodities. This can be attributed to two factors. First, the fact that geopolitical uncertainties remain persistently high in 2024, in part due to the tensions in the Middle East. Second, the central banks in emerging markets created important additional demand by buying considerably more gold than the long-term average by historical standards. The question of by how much the US interest rates will be lowered in 2025 is currently causing a measure of uncertainty, while the ongoing phase of high geopolitical tensions which is not likely to come to an end any time soon could ensure that the price of gold does not fall dramatically. The situation surrounding the price of oil is fundamentally uncertain. On the one hand, the global economy is not currently detracting, which limits the downside potential. On the other, the member countries of OPEC – Organisation of the Petroleum Exporting Countries – could ramp up their production, which would result in a greater supply and thus put the brakes on the upward potential. All in all, the commodity markets are therefore likely to continue to fluctuate massively.

Contact a client advisor for more information.

^{This publication is intended for information and marketing purposes only, and is not geared to the conclusion of a contract. It only contains the market and investment commentaries of Maerki Baumann & Co. AG and an assessment of selected financial instruments. Consequently, this publication does not constitute investment advice or a specific individual investment recommendation, and is not an offer for the purchase or sale of investment instruments. Maerki Baumann & Co. AG does not provide legal or tax advice. In addition, Maerki Baumann & Co. AG accepts no liability whatsoever for the content of this document; in particular, it does not accept any liability for losses of any kind, whether direct, indirect or incidental, which may be incurred as a result of using the information contained in this document and/or arising from the risks inherent in the financial markets. Maerki Baumann & Co. AG holds a Swiss banking license issued by the Financial Market Supervisory Authority (FINMA).}

^{*Please note that due to German regulatory requirements we are unable to provide the crypto service (Crypto focus module) named in this brochure to our clients domiciled in Germany.}

Editorial deadline: 13 December 2024

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