Stock market outlook 06/2024: Continued unclouded outlook on the stock market?

June 5, 2024

What has been the focus in recent weeks

The losses on the stock markets in April were already recouped in May, albeit with increased volatility. Some markets even reached new highs at times. The recovery was due to encouraging corporate results on the one hand and weaker US economic data on the other. The latter fueled hopes of a key interest rate cut in the near future. In the USA in particular, however, there is a very high need for financing due to the high level of national debt. The most recent bond auctions were rather sluggish. This was a negative factor for the markets and led to increased volatility.

One highlight was the publication of the quarterly results of Nvidia, the chip company that is the global focus of artificial intelligence (AI). Although expectations for Nvidia’s performance were once again extremely high, they were actually exceeded. The company now has the third-largest market capitalization after Microsoft and Apple, ahead of Alphabet (Google) and Amazon.

Our investment solutions and positioning

In our multi-asset strategies, we were already able to make up for the slight decline in April in May. Our strong positioning in the Swiss equity market had a supportive effect. For once, the Swiss Market Index (SMI) was clearly one of the winners in a global comparison. Gold and foreign bonds also contributed to the positive overall result. Our currency hedging paid off: the decline of the US dollar against the Swiss franc was significantly cushioned.

The inclusion of defensive sectors in our Global Equity Trends equity strategy has had a positive impact in recent weeks. Both the utilities and consumer staples sectors have made a strong contribution to the good result. On the other hand, value stocks have disappointed. Although they also made a positive contribution, they were clearly not among the global winners. In line with our investment principle of holding on to winners and disposing of losers, value stocks therefore had to give way to quality and growth stocks. As a result, our current positioning is once again more focused on large-cap companies with an admixture of defensive stocks.

As already mentioned, the Swiss equity market was one of the clear winners in May. Our Swiss Equity Selection equity strategy also made strong gains and reached new highs for the year. Both UBS and Alcon impressed investors with their quarterly figures, which in both cases led to price rises. The portfolio now also includes shares in the pharmaceutical company Galderma. The Swiss specialist in the field of dermatology originally came from Nestlé and has been listed on the Swiss stock exchange since March of this year. Galderma is very well positioned in this global growth market.

The winner of the last few weeks in our Global Equity Selection equity strategy is once again Nvidia. Once again, the quarterly figures were celebrated with a jump in the share price and Nvidia has been able to gain even more since then. There is also good news from Apple. After the iPhone manufacturer’s shares were caught up in a correction in the first quarter, they managed to break out in May and Apple is now approaching its previous all-time highs.

What next? And what needs to be considered?

Global economic growth remains intact, albeit with signs of a slowdown in some areas. Furthermore, corporate results are positive. At the same time, inflation has slowed considerably. Overall, this is a positive outlook for interest rate cuts by central banks and therefore positive for the markets. In the meantime, however, volatility is likely to remain high, as the markets are focusing on the publication of data relating to inflation and the economy and every publication needs to be interpreted immediately. Geopolitical risks and issues surrounding the high level of national debt in the US could also continue to have a negative impact in this regard. However, with a solid and, where possible, diversified investment strategy, combined with a long-term focus, you should still be able to sleep well.

The most important thing when investing is to be invested – for the long term. For example, there are probably still many investors who have missed the upswing that has been underway since the end of 2023 and are waiting for an opportunity to get in. So far, we have seen once again that waiting for the perfect entry point can be a very expensive affair.

We remain positive about the investment year 2024 and are maintaining our fundamentally neutral to slightly cyclical positioning in our multi-asset solutions for the time being. Gold also retains its important position.

Point Capital Group
5. June 2024