Recently, things have noticeably quieted down around the trade dispute initiated by the United States. This is likely due, on the one hand, to the fact that the United States is currently absorbed by the conflict with Iran. On the other hand, several court rulings have limited the U.S. President’s ability to impose high tariffs at short notice – thereby partially removing a key foreign trade policy instrument. In this context, it is noteworthy that U.S. consumer prices initially rose less sharply than widely expected after the introduction of the trade tariffs. Only in March and April – and thus alongside the escalation in the Middle East – did inflation pick up more visibly, this time on a global scale. As a result, market expectations have shifted significantly: whereas interest rate cuts were still the main focus at the beginning of the year, many are now expecting rate hikes by the end of the year. At the same time, markets are closely watching the negotiations between the United States and Iran, hoping that the strategically important Strait of Hormuz will soon be fully navigable again. According to the CEO of Chevron, conditions in the oil markets are likely to normalize only slowly even in the event of de-escalation. Damaged infrastructure and disrupted supply chains are expected to continue affecting supply for some time. In addition, many countries are likely to rebuild their strategic oil reserves, which would increase demand and could intensify upward price pressure.
The upcoming mega-IPOs of SpaceX, OpenAI, and Anthropic could prove to be a turning point for market structure. New “fast-entry” rules allow these stocks to be included in major indices almost immediately after their listing, thereby automatically triggering billions in passive capital inflows – largely independent of valuation or profitability. Particularly noteworthy in this context is FTSE Russell’s preliminary classification of SpaceX as a telecommunications company. Due to the absence of traditional growth metrics, a large portion of the stock is allocated to “value” indices – a purely technical effect. Overall, this case highlights the growing importance of index-driven demand: large IPOs are now capable of generating substantial passive inflows within a very short period, thereby supporting valuations even at high multiples and with limited earnings visibility. As a result, price formation – especially in the early phase after the IPO – is increasingly influenced by index mechanics rather than by fundamental factors. In this environment, a consistent focus on proven investment principles becomes essential. We deliberately emphasize the factors of quality and momentum: while momentum benefits from existing market trends, quality strategies focus on companies with high, stable profitability and solid balance sheet structures. Both factors have historically proven to be robust drivers of returns and complement each other to form a balanced investment approach.
Yields on long-term government bonds have risen in many regions since the beginning of the year, making them appear more attractive at first glance. At the same time, a resurgence of inflation is coinciding with highly indebted governments that continue to face substantial spending obligations. Against this backdrop, it is hardly surprising that investors are demanding higher yields as compensation for the risks they are taking on. A reduction in geopolitical tensions—as well as the recent decline in oil prices – could provide some relief. Nevertheless, a period of heightened market volatility remains likely. In currency markets, the sharp increase in transactions within China’s payment system, CIPS, since the onset of the conflict is particularly notable. A key driver is likely the energy sector, as sanctions against Russia and Iran are forcing countries such as India to pay for oil increasingly in renminbi, since payments in U.S. dollars are often not feasible. As a result, the Chinese currency is gradually gaining importance in global oil trade – albeit from a very low starting point. The U.S. dollar remains clearly dominant, with a share of around 80%. Geopolitical developments and rising bond yields have also been reflected in the gold market. Following a strong rally over the past 18 months, the gold price declined slightly in May, but still remains higher compared to the beginning of the year.
The U.S. equity market – as measured by the S&P 500 – has performed exceptionally strongly since the end of March, marked by a very sharp increase. This momentum was driven primarily by large U.S. technology stocks. While a high index concentration in a few names is something we are accustomed to in Switzerland, valuations in the U.S. equity market are now appearing increasingly stretched and call for caution. Against this backdrop, we adjusted the strike levels of our put options in the second half of May in order to hedge more specifically against potential market dislocations. In general, we continue to see attractive opportunities in global equity markets—though primarily outside the major U.S. index heavyweights. In fixed income, we take on foreign currency risk only very selectively. Factors such as the currently high level of global government debt and elevated inflation risks have historically tended to support the Swiss franc. In addition, we overweight high-quality corporate bonds relative to government bonds. We also complement our positioning with selected strategies in the area of alternative investments, as well as exposures to gold, commodities, and Swiss real estate.
Overall, our portfolios are broadly diversified and structured in such a way that – given the current market environment – they are well positioned across a wide range of potential scenarios.