Stock market outlook 11/2024: Victory for Trump – and for the stock market?

November 12, 2024

What has been the focus in recent weeks

In recent weeks, everything on the financial markets has revolved around the US presidential election. With Donald Trump’s clear election victory, the danger of a prolonged back and forth over the recognition of the election victory has now been averted. In addition, a candidate who will prioritize economic interests has won. Trump is said to check share prices several times a day – which is not a bad thing for investors to begin with. And finally, he even publicly cited the performance of the stock market as an indicator of his success. Share prices in the USA reacted euphorically to the election result. Investors are confident that the Republican winner will boost US economic growth and support American industry.

The big question now will be: How will Trump make his election promises come true? Deregulation, higher import tariffs, lower taxes and a new migration policy are the big issues. All in all, the majority of signals for the US stock market, which is still the leading index for the global stock markets, will initially tend to be positive.
One very decisive factor will be whether Trump’s economic and fiscal policy will fuel inflation again. Rising interest rates coupled with a further sharp increase in household debt is not a particularly good combination.

Our investment solutions and positioning

While our multi-asset strategies were still able to make gains in the first half of October, the second half of the month was characterized by a decline in Swiss equities. This led to a slight decline over the month. Once again, gold and real estate made the most positive contributions. Both asset classes therefore fulfilled their task of diversification. We have added financial industry stocks to the portfolio for the first time and have disposed of utility companies.

In recent weeks, the US dollar has gained ground against the Swiss franc. This has had a positive impact on our Global Equity Trends equity strategy. The winners in October included financial stocks and companies from the communications sector. At the lower end were value stocks and industrial stocks, which is why we will be disposing of them. Small capitalized companies and companies with strong growth will be added. All in all, the focus is becoming slightly more offensive.

Swiss equities lost some of their favor with investors in October, which also affected our equity strategy Swiss Equity Selection also suffered. For example, UBS and Novartis shares were sold off by over 4% on the day of the quarterly report. In the case of UBS, however, the recovery was not long in coming. Other financial stocks, such as Zurich Insurance, have also made further gains in recent weeks. The two chemical companies, Givaudan and Sika, had more trouble. In both cases, however, we see the recent share price weakness as short-term in nature and expect further strength in the long term.

In the Global Equity Selection equity strategy the index heavyweights Nvidia and Alphabet (Google) are among the clear winners. Only the travel company Booking posted stronger gains in October. While Alphabet and Booking have already published their quarterly results and were both able to surprise positively, Nvidia is due to do so on November 20. This could be significant not only for Nvidia itself, but also for the entire technology sector in the short term. However, hasty action on this day is not advisable from a long-term investment perspective.

What next? And what needs to be considered?

The two biggest risks for the further development of the financial markets are the further increase in US government debt on the one hand and the sheer unpredictability of Trump on the other. However, he sees the stock markets as a yardstick for his success. In this respect, this relativizes the two risks to a certain extent. The greatest opportunities lie in a further decline in inflation coupled with a flourishing economy and, in particular, further increases in corporate profits.

Equities
Trump’s economic and fiscal policy should have a positive impact on US equities and in particular on the financials, industrials, consumer discretionary and technology/communications sectors. It could be more difficult for defensive sectors such as utilities and consumer staples. Unfortunately, the same also applies to European equities in the wake of new import tariffs in the US.
⇒ We are generally positive about equities. However, special attention should be paid to valuations.

US dollar
The new administration wants to accelerate economic growth, which could tend to boost the value of the US dollar. But let’s not forget: in his first term in office, Trump called for a weaker US dollar in order to support the export economy. It will also be interesting to see how independent the Fed can remain in this regard. Trump has already called for the removal of Fed Chairman Powell on several occasions.
⇒ We are neutral on the US dollar.

Bonds
The big question will be how inflation behaves. Trump’s economic and fiscal program is basically fuelling inflation. US bonds should therefore be treated with caution. In addition, the US will have to issue more and more new bonds in order to cope with the growing budget deficit and interest payments. The risk of “stress in the system” and correspondingly even higher interest rates must be kept in mind.
⇒ We are cautious about US bonds.

Gold
The medium-term drivers of a rising gold price remain intact. In particular, demand for gold from many central banks, geopolitical uncertainties and rising US government debt should continue to give gold a tailwind in the medium term.
⇒ Accordingly, we are positive about gold.

Point Capital Group
12. November 2024

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