09 / 20


September lived up to its already poor reputation within the financial community this year as well. On average, this month is the worst since 1950, and many of the world's stock markets fell sharply for the first time since the March sell-off. The weakness was led by the US technology stocks, which had previously been running hot without interruption. After the strong gains of the previous months, the correction thus appears to be a welcomed adjustment. A renewed increase in the number of Corona cases and Israel, which went into a "lockdown" again, gave equity investors additional reasons to take profits. It is still unclear whether the human body can develop an immunity against the virus and if so, how long it will last. The question of immunity is important because it would allow states to better control or relax restrictions on movement. Meanwhile the election campaign in the USA is gaining momentum and in the first TV duel between Donald Trump and Joe Biden there was no clear winner. In the polls, Joe Biden continues to be considered the winner. From a purely statistical point of view, Donald Trump's prospects for re-election are not very good either: many economic indicators, which have plummeted due to the Corona virus, indicate that he will not be re-elected (see FOCUS). However, the data should be treated with caution, since after all, they are more likely to be outliers after the strong V-recovery that has already begun. Reporting on the 3rd quarter will begin in mid-October. This in turn will provide some insight as to how well the companies have performed in the harsh environment.

Equity Markets

The technology dominated Nasdaq 100 in the US lost almost 6%, pulling the broader S&P 500 down by 3.8%. The Euro Stoxx 50 lost more than 2.4% and temporarily tested the lower limit of a broad trading range that had been established for several months. The Swiss and Japanese markets showed a positive performance. Both indices rose slightly in a weak world market. Despite the weakness of the Nasdaq, the technology index remains in first place for the year, followed by the Chinese stock market. The European markets of Spain (-29.6%), England (-22.2%) and France (-19.6%) came in last. With the COVID-19 problem still unresolved, we believe that the technology sector is likely to maintain its relative strength to a certain extent. We have therefore used the weakness in September for additional purchases in the tech segment. The earning outlook for the overall market is very low for the 3rd quarter as well.  Earnings growth is expected to be -22% for US equities, which would mark the worst year since 2009 in terms of earnings growth. The technology, utilities and healthcare sectors are expected to show only a marginal decline in earnings (-0.5% to -3%). The strongest profit decline is expected in the energy sector (-108%) followed by the industrial sector (-61%).

Interest Rates

Interest rates remain at a very low level, with no significant movements. Higher interest rate trends will probably require, firstly, an agreement in the US budget dispute, secondly, a viable vaccine for the coronavirus, thirdly, improving economic data and, finally, a regime change to increasingly restrictive monetary policy by the central banks, triggered by inflationary tendencies.

Currencies & Commodities

With the return of risk aversion, the USD was a winner among the G10 currencies for once. It is therefore not surprising that commodities and precious metals tended to weaken. The price of an ounce of silver was hit hardest and slipped 17%, while gold lost over 4% against the USD. The price of timber corrected by over 34% after a record rally in the previous months. The activity in this market is an indication of strong construction activity in the USA, which is also fueled by the expansive monetary policy of the US Federal Reserve.


The US elections will now dominate the headlines more clearly. In the best case, the elections will run with a clear winner. The stock markets favor re-election of the incumbent much more than a change of government. Presumably, an election victory by Joe Biden with a simultaneously Republican-dominated Congress would be badly received by the financial markets. The performance of stocks in October could already give an indication as to who the next US president will be (see FOCUS) - because strong months usually occur when the incumbent is re-elected. It would be unpleasant if the result was such a close one that uncertainty about the next administration would persist. With regard to the elections, we will examine the possibility of hedging portfolios in October and, if necessary, make use of it. Nevertheless, given the current situation, we remain positive in the medium term. Despite the rise in share prices, investor sentiment has not turned into euphoria - on the contrary, surveys show that only a few investors are positive about equities. 


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