A number of things happened on the political stage in February. The talks initiated by the USA with Russia about a possible peace in the Ukraine war caused considerable surprise. This was particularly the case as, with the exception of Russia, none of the countries directly or indirectly affected were initially allowed to take part. With the USA focusing on its own interests in other areas, Europe has lost a long-standing reliable partner that has always made a significant contribution to the security of Europe. Although this situation means a higher risk for Europe, it also offers opportunities if the right conclusions are drawn and appropriate action is taken. The newly elected German Chancellor Friedrich Merz also emphasized that strengthening Europe is a top priority and independence from the USA must be achieved - a similar sentiment was echoed by Emmanuel Macron from France. Meanwhile, the US President announced tariffs of 25% on various products from the EU, which are to come into force from April. Of the tariffs threatened to date, only those over 10% on Chinese goods have actually come into force. A further 10% on all Chinese goods were announced a few days ago and are to be levied from March 4. The postponed tariffs of over 25% on Mexico and Canada are due to come into force on the same day, while tariffs on steel and aluminum are expected to come into force on 12 March. Economic data in the USA point to an imminent slowdown. The Atlanta Fed's Real-Time Barometer puts the economy in reverse gear at -1.5% for the first quarter. At the same time, consumers are afraid of higher inflation, as the University of Michigan consumer survey revealed. The US Federal Reserve must therefore continue to master an enormous balancing act between growth and inflation.
In light of the geopolitical news, the performance of the various stock market indices appears all the more astonishing. The EuroStoxx 50 closed the month best, followed by the SMI. Nestle deserves special mention in this context: after an already strong January, the company's shares were again among the top performers on the SMI in February with a return of +12.4%. The Japanese market (based on the Nikkei 225) was disappointing in February with -6.1% in JPY, although three of the five Japanese trading houses “sogo shosha” bucked the trend of the Japanese market - for example Mitsubishi Corp. with +0.3% in JPY. The US equity market was one of the weakest of the major equity markets with -1.3% in USD for the S&P 500. The consumer discretionary and communications sectors in particular contributed to this result and the so-called “Magnificent 7” - which make up a large proportion of the sectors mentioned - were also among the losers for once. Globally, the consumer staples and real estate sectors were among the winners, while the utilities, basic materials and energy sectors also achieved a respectable result.
The yields on Swiss and Japanese government bonds rose in February. This contrasts with the yields on government bonds from Germany, France and the USA, where they fell. While yields in Germany and France have fallen more sharply at the shorter end, the yield curve in the USA has flattened again due to growth concerns. As a result, the US dollar has depreciated by 0.8% and the euro by 0.7% against the Swiss franc, while the British pound has risen by 0.7% and the Japanese yen by as much as 2.2%. The spread for US high-yield bonds, which is close to its all-time low, is also noteworthy. After a strong January, the prices of precious metals in USD developed differently in February. Gold continued to soar, reaching a new all-time high over the course of the month and trading 2.1% higher for the month. Copper is also worth mentioning, with prices up 3.4% compared to the end of January. On the other hand, the price of Brent oil fell from USD 75.67 to USD 72.81 and is likely to have a corresponding impact on overall inflation.
The protectionist rhetoric of the USA and corresponding measures, geopolitical developments as well as ballooning government debt in many places are some of the factors that are likely to have a considerable impact on the capital markets in the coming months and years. Although semiconductor manufacturer Nvidia managed to beat consensus expectations, its shares were nevertheless hit the following day - despite sales growth of over 80% year-on-year and almost 15% quarter-on-quarter. This could be an indication that the high market expectations for AI-related stocks may be set too high and will be difficult to fulfill. In view of the many risks and high valuations, we reduced our equity allocation to a moderate overweight over the course of the month. We remain well diversified and are sticking to our asymmetric hedges.