The US economy continues to grow resiliently. While the cooling tendencies on the labor market and the higher cost of living due to inflation could manifest themselves in lower consumption in the medium term, an imminent recession is still not in sight. Meanwhile, the situation in Europe has not changed significantly and the medium-term outlook remains weak for the time being. In Germany, the fiscal outlook could possibly change with the break-up of the current coalition government and the expected new elections in February 2025. Although interest rate cuts have already been decided and implemented in Europe, experience has shown that it takes several months before any noticeable effects are felt in the real economy. The protectionist measures taken by the USA could have an additional negative impact on European growth in the future, while any further stimulus from China could make a positive contribution to growth.
US equities were once again the best performers in November. The S&P 500 closed the month at +5.9%, while the Euro Stoxx 50 was down -0.3% in EUR and -3.0% in USD. Although the Swiss Performance Index outperformed European equities with a return of -0.3% in CHF (-2% in USD), in a cross-comparison this is still 8 percentage points lower in USD than the S&P 500 in November alone. The clear winners of the month in the USA were shares of small to medium-sized companies. While not even 40% of S&P 500 constituents were able to beat them over the year as a whole, the figure for November was well over half. Chip manufacturer Nvidia was once again able to impress with the publication of its quarterly figures in November and exceeded consensus expectations. Although the company is forecasting higher sales for the fourth quarter, this failed to meet market expectations and the shares have been sold off in recent days.
Interest rates in Switzerland fell in November. For example, 2-year and 10-year Swiss francs still yield 0.18% and 0.25% respectively, which is 29 bps and 20 bps lower than in the previous month. SNB Chairman Martin Schlegel commented on the approaching 0% limit by saying that although negative interest rates are not the SNB's preferred method, they are available as an instrument if necessary. The Swiss interest rate level contrasts with that in the USA, where 2-year government bonds are paying 4.15% and 10-year bonds 4.2%. Yields have remained unchanged at the shorter end and have fallen by 11 bps at the longer end. The US yield curve has therefore flattened again and would quickly invert if this were to happen. The gold price took a breather in November and is trading at USD 2,643 per troy ounce, down -3.7%, which is nevertheless equivalent to a price increase of almost 28% for the current year. The US dollar index rose by a further 1.7% in November.
Donald Trump's upcoming second term in office will have a major impact on the further development of most asset classes. The impact of the planned trade tariffs on the US budget deficit is not clear. However, it can be assumed that these and any reactions from the countries affected will have major implications for the global economy. Overall, there is a great deal of uncertainty regarding the outlook for the new government. For the time being, we are maintaining a slightly positive outlook for equities and assume that US equities will be among the winners from the tax cuts and protectionist measures. However, valuations are high both in an international comparison and in a historical context and represent a risk. More than ever, we are focusing on appropriate diversification in the portfolio and, in addition to high-quality bonds, are also holding commodities such as gold, decorrelating strategies and asymmetric hedges.