While individual independent asset managers speak of price opportunities, the majority of those surveyed tend to be more gloomy in their forecasts. More than 50 percent of external asset managers also think that text software based on artificial intelligence is completely overrated.
Independent asset managers in Switzerland consider the topic of ChatGPT to be the greatest hype, i.e. the greatest exaggeration. A good 55 percent of respondents are of this opinion. Sustainable investing is now considered the second biggest hype, followed by technology stocks (see chart below).
The main reason for this assessment is probably the fact that although everyone is talking about the text-based dialog system based on artificial intelligence (AI), no one really knows how it could be used in a targeted manner - at least this is the dominant opinion among independent asset managers. Accordingly, there is also a certain reluctance to invest in corresponding AI companies.
This information is derived from the Aquila Asset Manager Index (AVI), which the Swiss Aquila Group is published every three months in cooperation with finews.ch. The index summarizes various forecasts and assessments by independent asset managers in Switzerland. 150 firms participated in the latest survey.
Alternatives to tech stocks
The investment behavior described is also partly attributable to the latest interest rate expectations. For example, respondents expect interest rates to rise further in Switzerland, Germany and the USA. Under these premises, there are some other asset classes worth examining besides (risky) technology stocks.
With regard to Switzerland, 55 percent (three months ago: 47 percent) of the survey participants currently expect interest rates to continue rising (see chart below); in the USA, the figure is as high as 64 percent (three months ago: 47 percent). In Europe, 64 percent of respondents continue to expect interest rates to rise.
Think in terms of variants and scenarios
"The interconnectedness of the international financial markets is greater than ever, and the current financial market turmoil will also be with us for a while. Risks in the system are not easy to see through," says Markus Gnehm, partner at the Winterthur-based asset manager Swiss Wealth Consulting. "It is therefore all the more important to pursue a strategy geared to one's own needs instead of choosing a standard portfolio. This allows one to think in terms of variants and scenarios. For this, a neutral and externally viewed assessment of the situation is essential," Gnehm continues.
In view of the many uncertainties and risks in the current year, more independent asset managers now expect lower share prices in the next three months. This is the opinion of 27 percent, compared with just 20 percent three months ago. Only 47 percent expect higher share prices, compared with 59 percent at the end of December 2022 (see chart below).
"We are currently observing a strong divergence in the gap between the macroeconomy and the microeconomy. Despite the still very negative sentiment in the macro area, we are currently identifying very interesting buying opportunities in the context of corporate bonds from the SME segment and in the niche area, as yields have risen well into double digits in many places," says Peter Lippross, Senior Portfolio Manager at the independent asset manager Genève Invest.
Buying opportunities not seen since the financial crisis
"Corporate bond default rates are and will remain low as companies across the board continue to do good business and post solid numbers. This is currently creating buying opportunities the likes of which we have not seen since the financial crisis," Lippross added.
Three months from now (see chart below), the independent asset managers see the Swiss Market Index (SMI) at a level of 10,964 (currently: 11,241).
Independent asset managers are skeptical about gold; the various interest rate hikes by central banks have clouded the view of the yellow precious metal.
Is a correction looming in gold?
By the end of June 2023, the respondents expect the price to reach 1,882 dollars per troy ounce (currently: 2,007 dollars) - well below the 2,000 dollar mark again.
They estimate the yield on the 10-year U.S. Treasury at 4.14 percent in three months (currently: 3.43) and the euro-franc exchange rate at 0.9866 (currently: 0.9850).
The next AVI index will be published in July 2023.
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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.
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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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