Asset managers want to invest less in sustainability in 2024
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.
The major investment theme of recent years is increasingly losing its shine: around a third of independent asset managers believe that interest in sustainability is declining and will be overshadowed by other trends in the coming year. This is in stark contrast to the ongoing discussion surrounding climate change, which has received a lot of publicity due to the COP28 climate summit recently held in Dubai.
However, professional investors obviously see things differently. For them, questions about a possible recession, inflation and future interest rate trends dominate. In addition to the 30 percent of asset managers surveyed who described the sustainability trend as declining, 32 percent are of the opinion that the topic will remain stable but will not develop further (cf. graphic below).
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These assessments are based on the latest Aquila Asset Manager Index (AVI), which the Swiss Aquila Group every three months in cooperation with finews.ch is published. The index summarizes various forecasts and assessments of independent asset managers in Switzerland. In each case, 150 firms participate in the latest survey.
Highest value since mid-2021
Overall, the external asset managers (EAMs) surveyed are extremely positive; as many as 72% of survey participants expect the Swiss Market Index (SMI) to be higher in the first quarter of 2024. This is an above-average figure, which was last achieved in the second quarter of 2021. At that time, the most recent stock market boom was actually at its peak (cf. graphic below).
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In view of the optimistic expectations, it is also interesting to see which sectors the EAMs consider most undervalued. According to the latest survey, it is by far the healthcare and pharmaceutical industries, followed by the energy and commodities sector and, in third place, the technology and IT sector. In many cases, this goes hand in hand with the companies that have been "beaten up" the most on the stock market over the past two years (cf. graphic below).
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Independent asset managers are also sceptical about another megatrend this year - artificial intelligence (AI) in investing. Just under 20 percent of those surveyed believe that AI has little influence and that other factors are more important.
AI still needs more acceptance
Over 40 percent of participants recognize at least a "moderate" influence and could imagine that this "science" could become even more important (cf. graphic below).
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Equities rather than gold again
In three months (cf. graphic below), the independent asset managers see the Swiss Market Index (SMI) at a level of 11,217 (currently: 11,132).
(To enlarge, simply click on the graphic)
In the case of gold, the EAMs see an ounce price above the psychological USD 2,000 mark by the end of March 2024, namely USD 2,035 (currently: USD 2,039).
They estimate the yield on the 10-year US Treasury at 3.97% in three months (currently: 3.90%) and the euro-franc exchange rate at 0.9370 (currently: 0.9429). The latter is likely to be related to the economic weakness in Germany.
Disclaimer: Produced by Investment Center Aquila Ltd. Information and opinions contained in this document are gathered and derived from sources which we believe to be reliable. However, we can offer no under-taking, representation or guarantee, either expressly or implicitly, as to the reliability, completeness or correctness of these sources and the information pro-vided. All information is provided without any guarantees and without any explicit or tacit warranties. Information and opinions contained in this document are for information purposes only and shall not be construed as an offer, recommendation or solicitation to acquire or dispose of any investment instrument or to engage in any other trans action. Interested investors are strongly advised to consult with their Investment Adviser prior to taking any investment decision on the basis of this document in order to discuss and take into account their investment goals, financial situation, individual needs and constraints, risk profile and other information. We accept no liability for the accuracy, correctness and completeness of the information and opinions provided. To the extent permitted by law, we exclude all liability for direct, indirect or consequential damages, including loss of profit, arising from the published information.
Independent asset managers in Switzerland are currently facing a difficult market situation. Many assets are proudly valued after the bull market in the current year, while at the same time the geopolitical fragmentation of the world does not make it easy to make the right investment decisions, as the latest edition of the AVI Index shows.
Independent asset managers in Switzerland are unanimous: local banks are threatened by overregulation, the US economy is overestimated on the stock market, and now is a good time to dry up profits.
In Switzerland, consumption remains the mainstay of the economy, while foreign trade is slowing growth. Inflation is close to zero.
Germany has probably overcome the recession and moderate growth of 1.3-1.4% is expected for the coming years. The EU-US trade agreement further improves the outlook.
In the USA, the figures are contradictory and a shutdown is looming.
The SNB and ECB are keeping their key interest rates unchanged at 0% and 2.0-2.4% respectively. Forecasts point to a slight rise in inflation.
The Fed is continuing its cycle of interest rate cuts due to weaker labor market data and probably also political pressure. Further interest rate cuts are expected.
The mood on the global bond markets is calm and yields are barely moving.
The most important stock markets remain close to their highs as market breadth declines. Individual technology stocks are coming under pressure.
The decline of the US dollar has been interrupted, but further weakness could follow in the medium term.
Gold reflects the loss of confidence in the US dollar.
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