Stock market outlook 12/2024: USA & Europe – a mismatched pair

December 6, 2024

What has been the focus in recent weeks

The US economy remains robust, corporate profits are booming and expectations for corporate earnings growth in 2025 are positive. The USA is dominating future topics in the field of artificial intelligence. The US chip manufacturer Nvidia, for example, which is one of the biggest beneficiaries, recently presented very strong business figures for the last quarter.

The situation is different in Europe. In addition, there are major political uncertainties and enormous challenges in Europe’s two largest economies, Germany and France. The stock markets have performed correspondingly differently. The broad index of Swiss stocks, for example, the Swiss Performance Index SPI, has even fallen in recent weeks, and across the board. Neither the segment of large companies nor that of small companies was able to make gains. The indices for small Swiss companies have even been down significantly since the beginning of the year.

The situation in the USA is completely different. The positive trends on the stock markets have continued in recent weeks. We are also seeing more and more positive trends in Asian markets.

Our investment solutions and positioning

After the first half of November was characterized by a correction, our multi-asset solutions recovered rapidly and ended the past month in the profit zone. Our exposure to global financials made the biggest contribution to this. For once, gold was unable to contribute to the positive result. However, given the strength we have seen in gold in recent months, we consider the current decline to be a healthy correction and are therefore not making any changes to our gold position.

In our equity strategy Global Equity Trends the new additions – in the form of small companies – immediately topped the rankings last month. As a result of developments in recent weeks, small and medium-sized companies with a focus on growth have also qualified for inclusion in the portfolio. Since the beginning of December, they have taken the places of real estate companies and large-cap companies. This results in an overall sporty portfolio composition for the last month of the current year.

The equity strategy Swiss Equity Selection made up some ground in the second half of November. However, the two Swiss heavyweights, Nestlé and Roche, are still struggling and were therefore unable to contribute to the positive monthly result. On the other hand, financial stocks are showing their best side. In addition to Zurich Insurance Group and UBS, our strategy has also included Swiss Re stocks since last month. We also sold Givaudan in November and added the generics manufacturer Sandoz in its place.

Our equity strategy Global Equity Selection equity strategy once again made strong gains in November, reaching a new high for the year. This was driven in part by Fortinet – a company in the field of internet security. The California-based company impressed investors with the presentation of its quarterly results, as a result of which the shares rose by ten percent. At the bottom of the ranking is the luxury goods company LVMH, which owns well-known brands such as Louis Vuitton, Christian Dior and Tag Heuer. This is mainly due to falling demand from China. We have not yet made any changes to the portfolio composition in this regard, but are reviewing them closely.

What next? And what needs to be considered?

Developments so far this year have once again shown how important it is not just to be invested in equities in our home market – on the contrary. Accordingly, we are maintaining our equity exposure in the USA, for example, at practically the same level. However, preferences may well change at the start of a new year – albeit at stock and sector level rather than at the level of individual countries.

We expect a soft landing for the US economy, which should allow interest rate cuts to continue, with a correspondingly positive impact on the equity market. Expectations of positive corporate earnings growth for 2025 remain intact. An important short-term question is how the US Federal Reserve will manage liquidity in the future. While Chairman Powell has so far tended towards an expansionary stance, his recent statement that he is in no hurry to cut interest rates could weigh on the markets in the short term.

Point Capital Group
6. December 2024

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