In retrospect, November proved to be a significant month for Switzerland: With the signing of a memorandum of understanding, the path was cleared for a reduction of U.S. tariffs from the previous 39% to a much lower 15%. Even though the approach is being critically debated domestically, the agreement represents an important step forward for Switzerland’s export-oriented companies. Meanwhile, the Canadian Prime Minister concluded an agreement on the construction of a pipeline approximately 1,100 kilometers long, designed to transport up to one million barrels of oil per day from the north of the country to the west coast. The aim of this project is to enable crude oil exports to Asia and thereby reduce the still strong dependence on the United States. The U.S. economic data released in November fell significantly short of expectations: The Conference Board Consumer Confidence Index dropped to 88.7 points (October: 95.5), marking the second-lowest level of the past five years. Retail sales in September – whose publication was delayed due to the “government shutdown” – rose by only 0.2% instead of the forecasted 0.4%. At the same time, wholesale prices increased as expected by 2.7%.
In November, the stock markets were particularly volatile, with NVIDIA coming under heavy pressure in the second half of the month: since its peak at the beginning of November, the semiconductor company temporarily lost more than USD 700 billion in market value. The trigger was Google’s recent progress with its own TPUs – Tensor Processing Units, Google’s AI accelerators – as well as the new language model Gemini 3, which is widely regarded as a technological breakthrough. While NVIDIA struggles, the valuation of Google’s parent company Alphabet is steadily approaching the USD 4 trillion mark. The MSCI World, affected by increased volatility among its heavyweight constituents, was at times significantly in the red but managed to recover and currently stands almost unchanged compared to the beginning of the month. Equally noteworthy is the development in the M&A market: with 63 transactions exceeding USD 10 billion so far, the record set in 2015 has been surpassed, marking a new all-time high. While large corporations are expanding aggressively, activity in smaller deals remains subdued – a sign of the growing focus on mega-transactions. Meanwhile, the ECB warns in its latest Financial Stability Review of excessive valuations in major U.S. technology stocks. Driven by “FOMO” – the fear of missing out – investors are increasingly ignoring risks. The central bank views the growing market concentration critically and points to the danger of sharp, correlated price corrections in the event of negative surprises. We, too, are approaching recent developments with caution: although we share the ECB’s assessment that the current situation is not comparable to the bubble at the turn of the millennium, the high valuation levels as well as existing fiscal and geopolitical uncertainties continue to pose certain risks to market stability – risks that we are actively managing through targeted hedging strategies.
The October meeting of the Fed revealed sharply differing views on a possible third interest rate cut this year. Fed Governor Christopher Waller spoke in favor of a rate cut in December, citing weakness in the labor market as well as persistently moderate inflation. In doing so, he positioned himself against several “hawks” in the FOMC – members who advocate a more restrictive monetary policy – who warn against further easing in light of robust economic data. The disagreement among the central bankers highlights the difficult balance between fighting inflation and supporting the economy. For the market, another rate cut in December seems a relatively safe bet, as it is currently priced in with a 100% probability. Over the next 12 months, the market expects more than three additional rate cuts. Kevin Hassett, who played a central role in Donald Trump’s economic cabinet, is increasingly being discussed as a possible successor to Jerome Powell. Such an appointment would further blur the already fragile line between monetary and economic policy and reignite the debate over political influence on the central bank.
Factors such as globally high government debt, soaring budget deficits, and persistently elevated inflation in the United States lead us to exercise caution with bonds. For portfolios with the Swiss franc as the reference currency, the situation is particularly challenging: the choice between foreign currency bonds with corresponding exchange rate risk and low-yielding Swiss franc securities often resembles a chess game in which only unfavorable moves remain – and even the supposedly best move results in only a moderately satisfactory outcome. We continue to rely on real assets – equities, real estate, and precious metals – and have once again achieved very good results this year. Against the backdrop of the risks mentioned, we remain cautiously optimistic. Volatility in the equity markets is currently comparatively low – but when it does rise, it usually happens abruptly and remains short-lived. For such phases, we are well prepared with our hedging strategies. Larger setbacks would be deliberately used for reallocations, investing the liquidity released into more promising assets.