Stock market outlook 10/2024: Massive stimulus measures in China

October 3, 2024

What has been the focus in recent weeks

What was long expected has now happened. After the European Central Bank (ECB), the Swiss Central Bank (SNB) and several others, the US Federal Reserve (Fed) has now also lowered its key interest rates in September. It was generally expected that the cut would come. The risk seemed too great that the Fed would fall behind the curve again, as it did with the rate hikes in 2022. However, the extent of the cut came as a surprise to many. The relatively large step of minus 0.5 % sent a clear signal: The Fed is willing to even proactively support the economy.

In recent days, we have received particularly positive news from China – the world's second-largest economy after the US. A whole series of massive monetary and fiscal policy measures have been announced. China is suffering from a major crisis in the real estate market, demographic challenges in connection with an ageing society and deflation. The measures adopted have the potential for a real turnaround. And not just in China, but far beyond its borders. The Chinese share indices have literally exploded and have since made significant gains. But the effects were also felt on the global stock markets: For example, prices for commodities such as copper rose significantly and shares in companies in the luxury goods or commodities sector also advanced substantially. China is very important for the global economy. As a reminder: in the best years, China contributed more than a quarter of global economic growth and thus also became the world's largest importer of many commodities.

Our investment solutions and positioning

Our multi-asset strategies all made gains in the third quarter. Our significant positioning in gold made a major contribution to this. This made further substantial gains, particularly in September, reaching new highs. As we also use gold in a currency-hedged form, the contribution to returns in recent months was also increased. The generally high proportion of Swiss francs in the portfolios has also paid off in recent months. With our current positioning, we feel that we are very well positioned for the coming weeks and months, even if there is increased volatility on the markets.

The Global Equity Trends equity strategy performed positively, but suffered from a weak US dollar, which did not result in any gains in Swiss franc terms. However, as a weak currency tends to be positive for the respective equity market in the long term, there is no cause for concern in this respect. The inclusion of more defensive sectors such as utilities and real estate stocks has had a very positive effect. At the beginning of this month, we also swapped growth companies for value stocks, which means that the portfolio is currently rather neutral.

In the Swiss Equity Selection equity strategy it was once again the stocks of smaller companies that made the most positive contributions. The top performer of the last quarter was Siegfried Holding, while Nestlé brought up the rear. Kardex is a new addition to the portfolio. The internationally active Swiss company in the field of warehouse technology impresses with its great growth potential and very solid financial figures. In return, we have disposed of Geberit.

As the last of the companies in our Global Equity Selection equity strategy it was the turn of Accenture and Costco Wholesale to present their business results. The former was able to convince investors, to which the company's shares responded with a price jump of over five percent. At Costco, on the other hand, there are question marks over whether the growth targets can be achieved in the future. In addition, the valuation is now very high. Following the pleasing performance in the current year, we have therefore decided to divest ourselves of the stock. The BHP Group is a new addition to the portfolio. As one of the world's leading commodity companies, we see very good opportunities for BHP in various market phases.

What next? And what needs to be considered?

The uncertainties surrounding a possible further military escalation in the Middle East and the outcome of the US elections argue in favor of diversified strategies and safe havens such as the Swiss franc, the US dollar and gold in the short term. In the medium term, however, equities are likely to remain in high demand: falling interest rates, rising corporate profits and robust private consumption with relatively low unemployment – all of this is positive and makes us confident about future market developments.

Point Capital Group
3. October 2024

Our experts: Jules Kappeler (CEO) & Christian Sutter (Portfolio Manager)