After the first quarter of 2018, Swiss asset managers have become more cautious. The threat of a trade war between the US and China is clouding the stock market imagination. These are the consequences.
Independent asset managers in Switzerland are bracing themselves for more difficult times ahead. Despite a good start on the stock market three months ago, they expect prices to tend lower over the rest of the year. Accordingly, they have reduced both the equity and the bond quota in their portfolios, in some cases significantly. The looming trade conflict between the U.S. and China and the already impressive stock markets are the two main factors behind the increasingly defensive mood among market participants.
This is according to the latest Aquila Asset Managers Index (AVI), published by the Swiss Aquila Group every three months in cooperation with finews.ch published. The index summarizes various forecasts from independent asset managers in Switzerland. Around 100 people took part in the latest survey.
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More than a third of the asset managers surveyed (35 percent) expect lower prices in the next three months in the Swiss Market Index (SMI). Three months ago, i.e. at the beginning of January 2018, it had only been 27 percent (cf. graphic).
A similar situation is also evident with regard to Europe, where 35 percent (previous quarter: 28 percent) of survey participants expect lower prices in the EuroStoxx50 expect. At S&P500 in the U.S.A., 37 percent (previous quarter: 32 percent) of respondents expect lower prices.
Rising interest rates
There is also agreement on the development of interest rates: In the Switzerland 35 percent of respondents (previous quarter: 16 percent) expect interest rates to rise for the 10-year government bonds off. In Germany 40 percent (previous quarter: 24 percent), whereas in the USA 35 percent of respondents (previous quarter: 16 percent) expect an interest rate hike in the next three months.
The proportion of market participants who now expect lower interest rates has almost disappeared and is now as low in the U.S. as it was five years ago. (cf. following graphic).
Dollar weakening expected
In terms of currencies, Swiss asset managers are assuming a stronger overall alignment between the Euro and the Franconia out: In this context, 55 percent of the freight forwarders surveyed (previous quarter: 48 percent) forecast that the ratio will remain unchanged, while only 24 percent (previous quarter: 33 percent) expect a stronger common currency in Europe.
With a view to the Dollar It is easy to see that the respondents are more or less assuming the status quo compared with the beginning of the year, or are even tending to expect a slight depreciation of the greenback (cf. following graphic).
Trade war clouds expectations
For the second year in a row, many independent asset managers reduced the equity allocation in their portfolios. At the same time, many market participants also reduced their bond allocation. Liquidity in the portfolios increased accordingly.
In other words: After the brilliant start to 2018 on the stock markets, most players have become exceedingly cautious, due not least to the threat of a trade war between the USA and China, which has already noticeably depressed prices on the financial markets (cf. graph below).
Specifically, the composition (Median) as follows: The share of Equities is now 40 percent (previous quarter: 45 percent), that of the Bonds 25 percent (previous quarter: 30 percent), while the Liquidity 15 percent (previous quarter: 10 percent).
Alternative investments remained unchanged at 10 percent, while the proportion of Gold and others Precious metals 5 percent (unchanged), as the AVI survey further indicates.
A good quarter (26 percent) of the asset managers surveyed also want to hire more staff in the next twelve months (see chart below). This is no coincidence. After all, many of them have apparently been able to manage significantly more money in the past six months - on the one hand through new money inflows and on the other thanks to market performance.
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In the latest Aquila Focus, Nicolas Peter, Head of Banking & Investments, discusses the continuing rally in US tech stocks and the lack of an interest rate cut in the USA for the time being.
#aquila focus #interest #techrally #eam #aquilaag
In 2023, numerous geopolitical risks came to the fore, supplemented by interest rate hikes by central banks in the fight against inflation. The conflict in Ukraine will soon last two years. In addition, the situation in the Middle East has worsened, particularly between Israel and Hamas. An escalation of the conflict to neighboring Arab countries has been prevented so far. Economic weaknesses are also evident in two of Switzerland's key trading partners: China and Germany. These developments are leading to a lack of important impetus from foreign trade. Geopolitical issues will continue to play an important role in the coming year. However, the past has shown that the impact of such events on the global financial markets is often short-lived.
Fewer sustainability investments, but more investments in pharmaceutical companies and the healthcare sector. Artificial intelligence en masse, but shares instead of gold. These are some of the resolutions of independent asset managers in Switzerland for the first quarter of 2024, according to the latest AVI Index.
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