Stock market outlook 02/2025: Successful start despite a lot of noise

February 6, 2025

What has been the focus in recent weeks

The new year got off to an eventful start in many respects. Despite the political uncertainties, the financial markets had a positive start to the new year. The US economy remains very robust, while the situation in Europe and China is completely different. The purchasing managers’ index for the manufacturing sector in the US, which is regarded as a leading indicator, has recently even jumped into expansionary territory. The current reporting season for corporate results for the fourth quarter of 2024 shows that the earnings of the largest 500 companies in the US (S&P 500) have developed very solidly. So far, around 50% of companies have published their results, with average year-on-year earnings growth of over 10%. However, this positive development is still strongly driven by the results of the major technology stocks.

Overall, around 80 percent of companies exceeded their profit expectations. What you need to know: In the long term, earnings growth is the most important factor influencing the development of share prices. The largest 600 companies in Europe (Stoxx 600) that have reported so far were only able to report an average increase in profits of around 1%. Despite solid growth, the prices of US technology stocks have not performed particularly well overall. This is due to the very high expectations of investors and the uncertainties surrounding the future profitability of investments in AI (artificial intelligence).

As we expected, the Swiss equity market has performed above average so far. Its rather defensive nature and potential to catch up with other countries have been key drivers.

Our investment solutions and positioning

In our multi-asset solutions we can look back on a successful start to the new year. Swiss equities and gold were among the clear drivers of returns, both of which we overweighted. On the other hand, we had to accept slight setbacks in both real estate and bonds. In January, we decided to include so-called cat bonds in the portfolios. As these investments generally develop independently of other asset classes, they are ideally suited to further increasing the diversification and robustness of the portfolios.

Our equity strategy Global Equity Trends also performed well in January. With the exception of global technology stocks, all of our investments made a positive contribution to the overall result. As the current trends are proving to be very stable, we have not made any adjustments for February. The portfolio therefore remains unchanged with a slight focus on high-growth and small and medium-sized companies.

In the Swiss equity strategy Swiss Equity Selection we added Lonza to the portfolio at the beginning of the year instead of Alcon. This is because we expect Lonza to have somewhat more potential in the medium term than Alcon. There is also good news to report from the two pharmaceutical companies Novartis and Roche. Both made significant gains in January and thus had a strong positive impact on the overall result. After the Swiss stock market lagged behind the international market last year, the race to catch up has now begun and our Swiss portfolio has even outperformed the market as a whole.

After two extremely successful years for our equity strategy Global Equity Selection the start to the new year has been comparatively cautiously positive. Some of the previous price drivers are currently in phases of correction or consolidation. In principle, however, we remain positive about high-growth quality stocks. Nevertheless, we have decided to sell Nvidia – at least temporarily. This follows an increase of a whopping 450% since our entry in 2021 and what we believe is now an extremely high valuation. New additions are Salesforce, Netflix and Galderma. All companies with very strong market positions and clear growth potential.

What next? And what needs to be considered?

For 2025, we continue to expect a mix of robust US economic growth, stubborn inflation and rising government deficits – particularly in the US. Healthy corporate earnings growth should continue to support equities. AI will remain a defining theme. AI usage trends are improving, which is also positive for cloud growth. The greater efficiency of more cost-effective new algorithms will lead to increased economic productivity.

We continue to regard the Swiss equity market as attractive for this year. In the long term, however, there is no getting around the growth-oriented technology stocks in the USA. There is still no other stock segment of comparable size that shines with such great innovation, outstanding earnings and extremely solid balance sheet figures. However, the high valuations make these stocks susceptible to corrections in the short term.

The issue of the customs dispute must also be kept in mind. As we know, there are no real winners in such a dispute in the long term.
Gold should continue to benefit from structural drivers and is therefore still relatively highly weighted in our multi-asset solutions. As far as bonds are concerned, we are focusing on quality bonds with high credit ratings.

In summary, we remain optimistic for a successful investment year in 2025. The key is that investors can cope with the increased volatility.

Point Capital Group
6. February 2025

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