Month: January 2025

Good Morning Ladies and Gentlemen

 ”Just the facts, Ma’am.”
Joe Friday, Dragnet

Last Week’s “Stefan’s Weekly

Thank you for the feedback on last week’s edition of “Stefan’s Weekly”. Before getting into today’s topic, let me add another comment to last week’s discussion.
Politicians need to prioritise their service to the state, which encompasses the needs and interests of the citizens, rather than merely focusing on the task of educating the public. In my view, such educational responsibilities should predominantly be managed within families and schools, as they play a crucial role in shaping individual values and ethical perspectives.
I see the challenges faced by numerous politicians lie in their failure or reluctance to differentiate between moral-ethical and responsible-ethical frameworks. What do I mean by that? I believe that a well-intentioned action does not inherently translate into a beneficial outcome for the majority of the population. Even worse, when political actions lack genuine intent and are primarily motivated by the pursuit of electoral gains, in that case, they are likely to be unsustainable in the long term.

Central Bank Action

On Wednesday evening, the Federal Reserve announced its decision to keep the key monetary policy rate within the range of 4.25% to 4.5%. Market participants expected this decision, as traders had foreseen that the primary interest rates in the United States would remain stable at this level. As I noted in a recent edition of “Stefan’s Weekly,” due to base effects, inflation in the U.S. is likely to decrease significantly in the coming months, paving the way for potential interest rate cuts.
Yesterday, it was the turn of the European Central Bank (ECB). European monetary authorities are steadily proceeding with interest rate cuts. In light of the economic slowdown and reduced inflation concerns at the beginning of the year, the ECB has decided to further lower its key interest rate. Thus, the ECB Governing Council resolved to decrease the deposit rate, which significantly influences the financial market, from 3.00% to 2.75%. Again, this was widely expected by market participants.

U.S. Economic Growth

In the United States, possible mass unemployment resulting from recently announced layoffs in the public sector, prompted by actions from the newly appointed government, may hinder economic growth prospects. The service sector has become the primary engine of the U.S. economy in recent years. If the ISM services index reflects a sluggish trend in the coming months, the U.S. services sector could begin to lose momentum, which would subsequently affect overall economic growth.

German Economic Indicators

In Germany, both the ZEW Index (ZEW | Latest news from ZEW – Home | ZEW) and the Ifo Index reflect a modest improvement. Notably, the ZEW Index, which previously indicated a dire economic situation, showed a slight uptick in January from -93.1 to -90.4 points compared to December. The assessment in December had fallen to a level typical of situations from which recoveries usually begin or at least stabilise. January could signify a positive first step. The ifo (ifo Business Climate Index for Germany | Survey Series | ifo Institute) business climate index for Germany also experienced a modest increase, rising to 85.1 points. Notably, the current situation component recorded an advance of one point, reaching its highest level since August 2024. The lowest value for the current situation was observed in November. Despite the prevailing pessimism in expectations, these developments suggest a potential stabilisation of the business climate. I would not be surprised to see that these initial signs of hope will further emerge in Germany during the early months of 2025, as I believe the situation is unlikely to deteriorate further.

To Sum IT Up

The European Central Bank and the United States Federal Reserve have acted in accordance with prevailing expectations within the financial community. Furthermore, there appears to be a potential sign of optimism regarding the economic outlook for Germany. However, the prospect of layoffs within the public sector in the United States may adversely affect short-term growth trajectories.

I think 2025 promises to be another interesting year for financial market participants.

Ladies and Gentlemen

As always, please share your opinion with me. Feel free to send your messages to smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day and 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

Good Morning Ladies and Gentlemen

”Put on some lipstick and pull yourself together.”

Elizabeth Taylor

In our increasingly complex world, many individuals seek simple explanations for a wide range of issues. It’s all too easy to assign blame to a single person or group for problems such as unemployment, inflation, pandemics, and other crises. However, this tendency has fueled the spread of fake news and conspiracy theories among not only the general public but also government officials. As is often the case, there are no limits; the more outlandish a conspiracy theory, the more likely it is to gain traction.

European Equities

According to the latest survey by Bank of America among global fund managers, allocations to commodities and bonds remain notably low. In January, there was a significant shift from U.S. equities to European markets, with the equity allocation for Europe experiencing the second-largest increase in the past 25 years. A net 41% of asset managers surveyed report being overweight in equities. The most commonly executed trades include long positions in the “Glorious Seven” (53%), long U.S. dollar (27%), and long crypto (13%). The primary event risks identified are abnormally rising yields (36%), potential Fed rate hikes (31%), and the possibility of a trade war (30%). Investors perceive the most promising opportunities for a risk-on scenario in China’s growth (38%), anticipated Fed rate cuts (17%), and advances in AI productivity (16%).

Interest Rates

In the bond markets, investors are closely monitoring the first significant economic data for January, as well as key central bank meetings scheduled for next week. Following a sell-off that concluded mid-last week, yields have continued to ease. This trend reversal was prompted by encouraging inflation figures from both the UK and the United States. Additionally, the absence of surprises from U.S. political developments is contributing to this stability. Moreover, sustained pressure on oil prices since last week is further reducing inflation premiums in the interest rate markets.

Common Sense and No Surprise

I find it perplexing that some individuals, particularly journalists, label the actions of CEOs in relation to President Trump as capitulation. Four years ago, many of these same CEOs supported the Democrats, and now they are aligning with Republicans. It is noteworthy that President Trump also backed Democrats in the past before transitioning to become a Republican President. While this shift can certainly be viewed as opportunism, it could equally be interpreted as a matter of common sense. CEOs have a responsibility to their shareholders, as well as to the many employees and millions of customers they serve. As Richard Quest from CNN recently highlighted, voting trends indicate that the public, most probably including employees and customers of the companies whose CEOs just engaged with President Trump and his administration, has made their views known. Therefore, it would be both presumptuous and unwise to disregard the need to adapt to the evolving political landscape in the United States.

Journalists, Please Get Over It

Finally, Ladies and Gentlemen, I believe journalists must set aside their indignation and return to the fundamentals of reporting. This means focusing on the story at hand without being swayed by its disturbing nature. For instance, the American people have made a decision, and journalists should start exploring its consequences, like who will bear which costs, risks, etc. Ultimately, that is the essence of reporting. I believe it is crucial to steer as clear as possible of hidden biases in reporting and journalism. Something, I think, that is particularly prevalent in European media, where many journalists tend to (over-) inject personal opinions into their work, leading to an increasingly narrow corridor of opinion. Enlighted readers and viewers are most probably not concerned with those journalistic opinions. All they want is straightforward reporting. The American people have chosen a new President and government. Whether one agrees with the decision or not, it has been made. It is time to move forward. As Elizabeth Taylor gracefully advised, “put on some lipstick and pull yourself together.” And if lipstick isn’t your preference, perhaps a drink will do the trick instead.

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 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

Good Morning Ladies and Gentlemen

”Our species can only survive if we have obstacles to overcome. You remove those obstacles. Without them to strengthen us, we will weaken and die.”

Captain James T. Kirk

I believe it is time to examine the likelihood of President-elect Trump’s promise to bring manufacturing jobs back to the U.S. Many people seem to have a somewhat simplistic view of this issue, but I think it deserves a more in-depth analysis. I am in the process of exploring this topic and beginning to develop some initial thoughts on the potential outcomes of this promise, which I would like to share with you today. But first, let us have a look at what happened to the U.S. inflation rate in December 2024.

U.S. Inflation Rate

U.S. inflation experienced an increase in December, rising by 2.9% compared to the same month in the previous year, marking an uptick from 2.7% recorded in November. Despite this rise, financial markets may take some solace in the fact that the inflation rate aligns with prevailing expectations, and notably, core inflation has shown a slight decline, falling unexpectedly from 3.3% to 3.2%.
Had inflation breached the 3% threshold, renewed apprehensions regarding interest rate hikes would likely have emerged. Nonetheless, and for the time being, there remains optimism that the Federal Reserve may implement moderate interest rate cuts throughout the year. Furthermore, U.S. producer price inflation was reported to be lower than anticipated as well. Considering the base effect, it is reasonable to project that the December inflation figure may represent a peak for the months to come.
My personal expectation is that the inflation rate could taper to approximately 2% from January to April.

Big Promise

President-elect Donald Trump articulated a commitment to revitalising the U.S. job market by implementing or increasing tariffs on (industrial) goods and services imported from foreign nations. This policy approach is designed to incentivise corporations, especially those that are U.S.-based but have established production operations abroad under more advantageous economic conditions, such as in the automobile industry, to invest in new manufacturing facilities within the United States. The overarching objective is to facilitate the return of jobs to the American workforce and stimulate domestic economic growth.

In Theory

In theory, this approach may be worth exploring. In practice, we might observe some companies relocating their manufacturing or production facilities back to the U.S. However, rather than employing human workers, these facilities are likely to utilise the latest state-of-the-art industrial robots for assembling cars and other products. Robots already play a significant role in Tesla’s production processes, and Elon Musk is a strong advocate for their use. Last year, he announced the additional introduction of 1,000 Tesla Bots within Tesla; the robots are also known as Optimus. These humanoid, general-purpose robots are based on Tesla’s AI technology. Additionally, Amazon, for example, currently “employs” over 200,000 robots alongside approximately 1.5 million human workers.

Unfortunately

Individuals who lost their jobs in manufacturing over the past decade are unlikely to regain those positions. While they may find employment in other industries, manual jobs in manufacturing are increasingly being replaced by industrial robots, regardless of whether production facilities return to the U.S. or not.

However

Relocating industries is a costly and time-consuming process, and if tariffs are being increased before the alternative production site is ready to produce any given product at the same or lower price, a surge in inflation does not seem unlikely.

Finally

Let me finish with another quote by Captain James T. Kirk. “One of the advantages of being a captain, Doctor, is being able to ask for advice without necessarily having to take it.”

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 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

Good Morning Ladies and Gentlemen

”History is often characterised not by deterministic power relations, but by tragic mistakes arising from the belief in enticing yet harmful narratives.”

Yuval Noah Harari (translated from German into English by myself)

Who won?

Finally, and once again, the sleepless nights are over; it is time to declare our year-end competition winner.
Like every year, the data stems from Finanz und Wirtschaft (fuw.ch).        

S&P 500

According to the source mentioned, the S&P 500 closed the year at 5’881.63. Each year, I notice that my readers tend to be overly pessimistic about equity markets, which makes me wonder why this is the case. Statistically, investing in equities has proven to be one of the best strategies. For the 2024 year-end competition, the lowest bid was 4’000. The closest prediction came from Dario, who estimated the index at 5’651 points. This was also the highest bid and just one point ahead of Barbara. Congratulations to Dario and Barbara, and thank you to everyone who participated!

Gold

According to the source mentioned, gold closed the year at USD 2’625.27, finishing in clearly positive territory. Some of my readers had predictions around USD 2’400.00. However, the highest bid and the closest prediction came from my partner, Hans Schiefen, who estimated that gold would close the year 2024 at USD 2’500, just USD 5 ahead of Adrian’s prediction. Well done, Hans and Adrian, and thank you all for participating!

Nvidia

That was an interesting experience! According to the source mentioned, Nvidia closed the year at USD 134.29 following a 10:1 stock split. However, many participants were quite bearish on Nvidia, with some estimates dropping as low as USD 19.50. The closest prediction for Nvidia came from Barbara, who guessed USD 125, just USD 2.20 ahead of Dario. Well done, Barbara and Dario, and thank you to everyone for participating!

The Winner

Ladies and gentlemen, this year’s competition was once again very close, particularly between Barbara and Dario. It was a real photo finish!
And the winner is… Dario! Yes, this marks his victory for the second consecutive year. Dario’s bet of USD 2’371 on gold was closer than Barbara’s bet of 2’050, making him this year’s champion.
Last year, my partner Ronni won, but since he is from Incrementum, Dario takes the official title as the winner for the second time in a row.
Congratulations, Dario! Another one-ounce silver coin will be sent to you next week. Well done!

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 into 2025; stay healthy, fresh, fit and happy!

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