China and Powell send markets higher.

We are pleased to count you among our Market Compass readers. The monthly publication provides interesting insights and suggestions regarding the current market environment.

Our view on the markets and investment strategy in the October 2024 Market Compass.

Highlights Include:

China’s Stimulus Surge

In the second half of September, China’s equity markets experienced a significant rally, with the Hang Seng and CSI 300 indices rising by as much as 21.8%. The Chinese government has introduced a broad stimulus package combining monetary and fiscal measures to address the country’s structural challenges. However, while markets have reacted positively, we remain skeptical about whether these measures will truly resolve China’s economic difficulties in the long term.

Fed’s Jumbo Rate Cut

In a surprising move, the US Federal Reserve cut interest rates by 0.5% in mid-September, despite a robust economy. This shift in monetary policy, aimed at stabilizing the labor market, reduced the target rate range to 4.75%–5.00%. This rate cut has led to lower interest rates globally, with US 10-year yields falling by 0.13% and German yields by 0.18%, boosting fixed income markets and supporting equity market gains.

Swiss National Bank Moves

The Swiss National Bank (SNB) cut its key interest rate by 0.25% for the third time this year. The rate cut was widely anticipated and coincided with the Swiss Economic Institute (KOF) lowering its growth forecasts for Switzerland for 2024 and 2025. The SNB’s proactive measures aim to support Switzerland’s slowing economy.

Investment Strategies

Intel, once the world’s largest chipmaker, has recently been in the spotlight following rumors of a potential takeover by Qualcomm and Apollo. The company has faced significant operational challenges, with its market capitalization halving since the beginning of the year. Despite these challenges, Intel’s stock has recently seen a rebound, offering potential opportunities for investors in the semiconductor space.

Market Outlook

Despite the positive performance of global equity markets, we maintain a cautious stance. We believe that the current market consensus is overly optimistic, pricing in a “blue sky” scenario where all risks are ignored. Earnings estimates for 2025 remain ambitious, and we foresee limited potential for further market gains. Consequently, we continue to favor a neutral equity allocation and an overweight position in high-quality corporate bonds, which serve as a hedge against economic downturns.

In conclusion, our tactical positioning emphasizes high-quality corporate bonds while maintaining a balanced approach to equities. As market volatility persists, this strategy allows us to navigate the uncertain financial environment with confidence.

Ready to dive in? Download the full PDF of our October 2024 Market Compass for an in-depth analysis and forward-looking guidance on navigating these turbulent times in financial markets.

Do not hesitate to contact us with any questions about the topics discussed. We are happy to assist you with our expertise.