Stock market outlook 09/2024: Those who keep their nerve have an advantage

September 4, 2024

What has been the focus in recent weeks

As stated in our last market commentary, increased volatility on the capital markets was to be expected. Unfortunately, this is exactly what happened. After a dramatic slump of around 20% in a very short space of time, the Japanese stock market almost completely recouped its losses towards the end of August. One of the main reasons for the developments was probably the interest rate hike by the Japanese central bank and the associated technical effects. The turbulence in Japan had an impact on the global stock markets, which then largely calmed down again in the short term. One positive aspect was that the recovery was relatively broad-based and not limited to individual large stocks. The recovery was supported by signals from Jerome Powell, Chairman of the US Federal Reserve. He has now held out the prospect of interest rate cuts for September for the first time. As a result, share prices rose and yields on US bonds fell. This also led to a weaker US dollar, particularly against the Swiss franc.

The publication of results from Nvidia, the chip company that is at the heart of developments in artificial intelligence (AI), also caused nervousness. Although Nvidia was able to present extremely strong results, some of which far exceeded analysts’ expectations, the share price fell. However, if you look at this in the context of the previous share price increase of around 160% since the start of the year, this is put into perspective. However, the short-term reaction following the publication of the results shows how extremely high expectations of AI are.

Our investment solutions and positioning

The diversification in our multi-asset strategies paid off once again at the beginning of August. The decline over the course of the past month in the defensive and balanced segments was almost fully recovered. The performance of gold and bonds was particularly pleasing. As we hedged both asset classes, this even made a positive contribution to the monthly result. Even though multi-asset strategies have lower long-term average returns than pure equity strategies, it has been shown once again that they can be much more stable in turbulent market phases.

In our Global Equity Trends equity strategy the highest positive contribution came from financials and industrials. By contrast, stocks from the communications sector and small-capitalized companies are at the lower end. This also led us to sell these at the start of September. The healthcare sector, utilities and companies with historically lower volatility have been added. The current focus has therefore clearly become more defensive and should offer good relative opportunities in various market phases.

In the Swiss Equity Selection equity strategy smaller companies such as Galderma and Siegfried Holding once again performed well and had a strong positive impact on the overall result. More cyclically sensitive stocks such as ABB, Holcim and Geberit struggled far more. However, considering the performance of such companies to date, we do not consider the short-term weakness to be a cause for concern. There was also news from Nestlé. A surprising change in management was announced and since September 1, the new CEO has been Laurent Freixe – a Nestlé “veteran”. It remains to be seen where the company will develop under him. However, after an initial shock on the stock markets, the share price stabilized immediately.

In recent weeks, the top performers in our equity strategy Global Equity Selection Fortinet and newcomer Resmed. The former, an IT security company, impressed investors with the presentation of its quarterly figures, as a result of which the stock jumped by over 25%. Resmed, on the other hand, was in a correction from fall 2021 to the end of 2023. Since then, however, the medical device manufacturer has been on the rise again. At the lower end of the portfolio are well-known names such as Amazon and Alphabet (Google). However, both companies are merely in corrections of previous upward trends, which is not yet a cause for concern.

What next? And what needs to be considered?

The markets are currently bouncing from data point to data point, leading to corresponding nervousness. Disappointing data from the purchasing managers’ index for industry in the US published on September 3 was immediately followed by sharp falls on the stock markets and rising bond prices in some cases. The increased volatility on the markets will most likely continue in the coming weeks. The US labor market report will be published on September 6. A disappointing labor market report, for example, could heighten fears of recession risks and prompt the US Federal Reserve to take aggressive measures. It will report on this on September 18.

We continue to expect a positive investment year overall in 2024. What makes us particularly positive: The fundamentals of many large, high-quality companies are intact. Solid balance sheets with low levels of debt, high and often even rising profitability figures and good business models. It is advisable to maintain a long-term perspective and the motto is: those who keep their nerve and thus a cool head have a clear advantage. Of course, a diversified orientation of investments and investment strategies also helps. Depending on the investment solution, we continue to focus on quality equities and bonds, gold and the Swiss franc.

Point Capital Group
4. September 2024

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