10 / 20


The performance of the stock markets was characterized by high volatility in October. The fact that US President Trump was infected with the corona virus at the beginning of October only caused uncertainty for a short time. US markets almost approached their all-time highs by mid-month, before the rising COVID-19 case numbers and the associated, in part sharp lockdown measures in Europe led to strong sell-offs in the markets. The lack of agreement in the talks on the next US stimulus package created additional pressure on sales. Due to the still uncertain situation, the ECB has announced that the " Pandemic Emergency Purchase Program" (or "PEPP" for short) will be strengthened from December onwards. The ECB's next easing measures could be broader in scope than simply expanding the bond purchase program from the previously expected 500 billon EUR. An expansion of the other bond purchases ("APP") or even a reduction in the key interest rate, which currently stands at 0%, would also be possible. Waiting until December seems to make sense in the light of the still open US presidential elections and the pending BREXIT, as the survey results for the services sector in Europe have already pointed to a renewed, more pronounced contraction even before the increase in corona cases. However, Christine Lagarde has also pointed out that the fiscal stimulus is just as important in supporting the European economy. The showdown in the U.S. presidential election is set to begin in the first week of November. Hopefully by 4th November we will know with sufficient certainty who will be the president of the largest economy. The worst-case scenario for the stock markets would be a very close, contestable result, which could mean weeks of uncertainty and a political standstill. According to surveys, Donald Trump is clearly behind challenger Joe Biden. Biden's lead is now much more stable and larger than Clinton's lead four years ago. The high election participation so far also speaks rather in favor of Biden, as it increases the accuracy of the poll. Trump's hopes are thus once again based on the swing states, which are the source of the surprises for the election outcome.

Equity Markets

The financial markets lost drastically in some cases. Only the Asian markets could withstand the sell-off. The German DAX lost by far the most, once more with a decline of over 9% under SAP's poor quarterly figures. The otherwise defensive Swiss market also slipped over 6%. US markets were only slightly down thanks to the technology heavyweights, thus confirming our regional overweights. The earnings reports of the heavyweights Apple, Alphabet and Amazon.com presented strong figures, but investors reacted in a mixed way to the reports. The Japanese Nikkei lost only 0.9%. The outcome of the elections is likely to have implications for the further course of the stock markets, especially for the various sectors. Among the democrats, energy stocks (especially oil stocks) or even bank stocks and technology stocks could face headwinds. In contrast, companies in the "green" energy category would receive a boost. If Trump wins again, a broad relief rally would probably be expected (continuity, continued low corporate taxes).

Interest Rates

In the USA, interest rates rose surprisingly sharply. The interest rate market is thus clearly looking beyond the "second wave" of corona figures and is anticipating an environment of rising inflation/growth, particularly in view of the expected fiscal stimulus. The 10-year US Treasury yield rose above 0.82%. The situation is different in Europe, where interest rates continued to fall under the announced lockdown measures and the very expansionary ECB.

Currencies & Commodities

The USD traded sideways against the CHF and the EUR slid back below 1.07 francs. Gold and silver closed only slightly changed. The price of a barrel of WTI crude oil dropped significantly by 11% under the Covid-19-induced weakness in demand. Agricultural commodities such as corn or cotton continued to benefit from a prolonged drought.


The stock markets are once again facing a corona dilemma. Until a few weeks ago, nobody expected renewed lockdown measures. The price setbacks on the stock markets were correspondingly large, especially in Europe, where national curfews are once again a reality. Politicians are trying to weigh up the benefits and harms of partial lockdowns. The economy should continue to run as far as possible, but in France or Germany there is a tendency to close down businesses that are not indispensable. The coming economic figures will be all the more important in this respect in order to get a feeling for the effects of the tightened measures. The harsh environment continues to be countered by major monetary and fiscal policy measures by the authorities, which will strongly support real values in the medium term. The world is witnessing record-breaking budget deficits, as last seen in the post-war period in 1946 (see Focus). Until the US elections are clearer, we are taking a more cautious stance, although we are optimistic for the stock markets in the medium term despite all the current negative headlines because of the generous stimulus and an effective vaccination against the coronavirus expected in the medium term.


Focus  Market Forecast