The Road to Year-End

Good Morning Ladies and Gentlemen

”Peace is not everything, but everything is nothing without peace.”

Willy Brandt

Weakness

Yesterday, I received a query from a reader regarding the recent market downturn, and I am pleased to offer my perspective. To begin, 2024 has been an outstanding year thus far, and our investment portfolios have shown strong performance. It almost feels out of place to discuss any weakness or downward movement in the market.

Current Market Sentiment

Nevertheless, it is fair to assume that multiple factors contribute to a potential downward trend. On one hand, investors are cautious due to the prospect of heightened tensions in the Middle East. On the other hand, the upcoming US elections are creating uncertainty. Furthermore, investors carefully scrutinise weekly and monthly data to guide their decisions. While this is typical in financial markets, it can lead to short-term fluctuations in both directions. Due tomorrow, the monthly US labour market report has dampened market activity because the recently published US jobs data has indicated a robust labour market, leading to speculation that tomorrow’s monthly report may also be strong. Furthermore, the sentiment in the services sector has experienced a significant and unexpected improvement. This development interests investors as it could potentially reduce expectations for further interest rate cuts by the Fed. In addition, if oil prices continue to rise due to tensions in the Middle East, fear of increasing inflation could increase again.

Switzerland

In contrast, Switzerland is experiencing low inflation, with the rate dropping to 0.8% in September, the lowest level since July 2021. Deflation suddenly seems a more significant concern for the Swiss National Bank than inflation. Moreover, there are expectations of further interest rate decreases in the eurozone, as senior ECB representatives have recently hinted at additional cuts. This is partly attributed to the declining business sentiment in the eurozone, which reached its lowest level in seven months in September.

The Road to Year-End, my 2 Cts

Ladies and gentlemen, I am happy to share my views. Since I cannot foresee the future, I look at the past, consult statistics, question our investment approach, and conclude. Statistically, the weeks before a presidential election are usually not very strong, sometimes even weak. Investors do not like uncertainty, and not knowing who will be the president of the United States for the next four years leads to such uncertainty. Usually, once investors assume they see the outcome, confidence resumes, and markets may turn positive. This could then lead to a post-election year-end rally. This is more or less how I see it for the time being. However, a further escalation in the Middle East and an unexpected negative twist in the war between Russia and Ukraine could worsen it for investors. In contrast, a de-escalation in the Middle East and an unanticipated positive twist in the battle between Russia and Ukraine could make it better for investors. This means you may want to gauge your investment risks and opportunities according to your individual convictions.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li