Category: Stefan’s Weekly

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

Good Morning Ladies and Gentlemen

”It is ideas, not vested interests, which are dangerous for good or evil.”

John Maynard Keynes

Non-Intrinsic

It is in the nature of things and a well-documented phenomenon that individuals tend to overestimate the validity of their personal analyses and perspectives and underestimate those of others. I am aware of this cognitive bias, and yet I remain convinced that my observation regarding the perception of a growing dominance of the non-intrinsic gaining influences in various domains, including investment decisions, the announcement of political initiatives, and interpersonal interactions, cannot be entirely unfounded.
Why am I discussing this topic? Perhaps it’s due to frustration, a lack of understanding, or a combination of both. Let me clarify my thoughts further and, hopefully, by doing so, uncover the things that seem incomprehensible to me.

Non-intrinsic in Asset Management

What are the underlying factors that contribute to momentum-driven investments in equities associated with companies trading at price-to-earnings multiples exceeding 100? This phenomenon appears perplexing.
How is it feasible to obtain SEC approval for financial products based on unknown issuers with little to no established reputation? Additionally, how do so-called “meme stocks” (Meme stock – Wikipedia) attract investors, while companies that have consistently produced cashflows and distributed dividends for years or even decades are largely neglected?

Reality?

I believe that excessive valuations in certain asset classes are largely due to narratives that create shared perceptions, even when those narratives may not be entirely grounded in reality. I sometimes have the feeling that many investors these days are unaware of what key valuation figures are all about and, therefore, get carried away in intersubjective realities of non or little intrinsic value.
So-called intersubjective realities refer to the shared understanding and mutual experiences that are constructed through social interactions among individuals. This concept highlights the significance of collective perception and the ways in which individuals co-create meaning within their social contexts. It emphasises that realities are not solely individual constructs but are significantly influenced by the interpersonal dynamics and cultural frameworks that shape human experience. The exploration of intersubjective realities is vital for understanding how knowledge, beliefs, and social norms are established and perpetuated within different communities.
For example, a well-known saying attributed to political figures like Lenin, Goebbels, and Hitler suggests that if something is repeated often enough, people will come to believe it is true. There exists scientific evidence to substantiate this thesis, which underscores the importance of critically evaluating sources of investment advice. Accordingly, I frequently highlight that banks, brokers, analysts, investment advisors, local shamans, religious leaders, and participants in online forums may not always provide the most reliable guidance. Without a comprehensive understanding of the rationale underlying their recommendations, often driven by financial motivations, individuals are ill-equipped to assess whether such advice is appropriate for their specific circumstances.

Above the Law

Historically, the principle of equality before the law has not been universally upheld. This disparity can, I believe,  be traced back to our Christian heritage, in which, for over two millennia, common individuals have generally been treated with relative equality among themselves; however, aristocrats and ecclesiastical authorities have often been granted exemptions from legal accountability. In the contexts of entrepreneurship and politics, this unequal treatment tends to be more nuanced and less overt, complicating the discourse surrounding the application of justice. However, today, we face a new dimension in this regard. But so pronounced and unrestrained is somewhat difficult to understand, isn’t it? Some political and/or economic leaders can seemingly post whatever they want on social media platforms without having to fear any consequences.

Aftermath of Euphoria  

The excitement surrounding the U.S. Presidential election has already faded quickly in the utilities and transportation sectors of the Dow. Stocks in utilities, oil, chemicals, and telecommunications have fallen below their pre-election lows. On a positive note, enthusiasm for technology and cryptocurrencies remains strong despite questions regarding valuation. Will eventually intrinsic value prevail?

Merry Christmas

Ladies and Gentlemen, thank you all for your inspiring feedback and comments throughout the year. I have been writing “Stefan’s Weekly” for many years now, and I always appreciate receiving your messages. On certain topics, I may occasionally feel a bit overwhelmed, which can lead to delays in my responses. However, I strive to reply to every message I receive and will continue to do so in the future.
Merry Christmas to you and your loved ones, and a happy and prosperous 2025.

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

Good Morning Ladies and Gentlemen

”What exactly is your ‘fair share’ of what ‘someone else’ has worked for?”

Thomas Sowell

The ECB Base Rate Cut Expectation

The European Central Bank’s (ECB) monetary policy meeting scheduled for yesterday, December 12, 2024, brought no surprises. Expectations were for a rate cut of 25 basis points, reducing the rate from 3.25% to 3.00%.

Current: The ECB Base Rate Cut Reasoning

The European Central Bank (ECB) is continuing its strategy and staying the course to combat a decreasing threat of inflation by implementing its fourth key interest rate cut since this summer. The deposit rate, which significantly impacts financial markets, has been lowered by a quarter of a point to 3.00%. Under the leadership of central bank president Christine Lagarde, the monetary authorities began the trend of rate cuts in June 2024 and have maintained this approach consistently. It marks the first time in over a decade that the ECB has reduced interest rates in four consecutive meetings.
However, despite these reductions, significant economic risks remain for the eurozone, as indicated by key leading economic indicators. Additionally, the labour market shows signs of weakness, with layoffs and plant closures reported among major European car manufacturers. These developments add pressure on the ECB to take further action. The recent measures by the ECB should be viewed in the context of balancing interests, especially as the monetary watchdogs are currently facing a renewed rise in inflation rates.

Future: The ECB Base Rate Path

However, it is not surprising that we are seeing some effects from energy prices as the year comes to a close. At the beginning of the year, it was already evident that base effects related to energy prices would impact the current situation. Consequently, the European monetary authorities are likely to feel relatively relaxed about the slight increase in price pressure in the short term. The key factor remains that the medium-term inflation outlook is expected to remain stable. For this reason, I anticipate that the monetary guardians will continue to lower interest rates in the coming year. In the first half of the year, we will experience significant base effects, which should contribute to a decline in the core inflation rate, and it is the core inflation rate, which excludes energy and food prices, that has been a particular concern for the central bank recently.
Nevertheless and as usual, the European Central Bank left open whether and how the interest rate staccato will continue in 2025.

The Swiss National Bank

The Swiss National Bank’s (SNB) decision to lower the interest rate by 50 basis points to 0.5% instead of the expected 25 basis points caught me by surprise for two main reasons. First, I didn’t observe sufficient pressure for such a significant cut due to economic factors. Second, I feel that this action may unnecessarily restrict the potential for future rate reductions.
It seems the SNB is heavily relying on the stimulating effect of this largest interest rate cut by Swiss monetary authorities in nearly a decade, aiming to preemptively address any signs of deflation or recession. As a wanted result, the Swiss franc weakened against the Euro, making Swiss exports cheaper and more competitive. However, historically, these effects have only been successful in the short term.

Last But Not Least

The next U.S. Federal Reserve meeting is scheduled for Wednesday, December 18. Will we see another rate cut before Christmas?

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

Good Morning Ladies and Gentlemen

”I love Christmas. I receive a lot of wonderful presents I can’t wait to exchange.”

Henny Youngman

The year-end is approaching, and I thought this would be a good time to look at current prices and where we are with our year-end competition.

S&P

So far, the highest bet on the S&P comes from Dario and stands at 5’651; Barbara’s bet is only one point behind 5’650 and the lowest at 4’000 and comes from Attila. While I am writing this edition of “Stefan’s Weekly”, the S&P stands at 6’084.9, well above even the highest bets.

Gold

So far, the highest bet on gold stands stems from Hans at 2’500 and the lowest at 2’050 from Barbara, and again, while I am writing this, gold trades at 2’638.45, well above the highest bet.

Nvidia

Okay, Ladies and Gentlemen. Barbara’s highest bet on Nvidia is 1’250, and Adrien’s lowest is 195. What is true for the S&P and gold is certainly also true for Nvidia, which is currently trading at 144.95 after a 1:10 split. It seems Barbara is everywhere this year…

My bets

I like to be transparent every year. However, I am not sure if I already let you know, so my bets are Gold 2’250, Nvidia 999, and the S&P 5’220. Oh boy, it looks as if I am going to be way off this year!

Fingers Crossed
I keep my fingers crossed for all of you and look forward to sending this one-ounce silver coin to the winner at the end of the year.    

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

Good Morning Ladies and Gentlemen

”Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.”

Groucho Marx

Last Week’s “Stefan’s Weekly”

Last week, I wrote: “Statistics show a clear correlation: as a country’s GDP per capita increases, so does its energy demand. In other words, prosperity is closely tied to energy availability. Electric vehicles, KI, still growing population, etc., demand high and continuous levels of (electric) energy.” Furthermore, I asked: “Where should this come from?”

Your Answers I

Thank you very much, Ladies and Gentlemen, for the numerous responses I have received. I was truly overwhelmed by your feedback. There is significant concern among my readers. While a constant source of energy is essential for any society aiming for prosperity, I was surprised to see how many of you also care about environmental issues. The consensus from your feedback is clear: life without energy would be challenging, so it should be available without restriction at an affordable cost, and its production should prioritise cleanliness and sustainability. It was fascinating to see the energy mix that my readers prefer. While cost and environmental concerns were key factors, the need for energy to be consistently available 24/7 contributed to the unsurprising conclusion that many of you believe we need more nuclear power plants.

Your Answers II

The issue, of course, is that nuclear power plants cannot be built in the short term, which means there needs to be a transitional source of energy. Most of my readers are aware of this fact and, where possible, would prefer to utilise hydropower, solar energy (primarily for home use), and small-scale but efficient liquid gas power plants. Only a few have mentioned coal, as its energy density, along with its CO2 and soot emissions, makes it an unattractive option.

My Question

Well, Ladies and Gentlemen, even if we simplify the discussion in my “Stefan’s Weekly,” we can all agree that our society needs reliable sources of energy that are affordable, accessible at all times, and environmentally friendly. In this context, nuclear power plants represent a promising alternative. So, why do the politicians we elected not seem to recognise this?

Politics

I have always believed that politics should revolve around a competition of ideas, where the best and most transparent proposals for the majority prevail. Unfortunately, significant structural reforms, and this is not only true in politics, frequently generate a considerable number of losers, many of whom are voters. This dynamic leads politicians to be cautious about undertaking essential, extensive reforms. Consequently, they often engage in discussions of ambitious initiatives while implementing only marginal changes. It has become evident that their evaluation hinges not on tangible achievements but rather on the promises and declarations they make.

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

Good Morning Ladies and Gentlemen

”The best obtainable version of the truth.”

Bob Woodward

U.S. Inflation Data

This week’s U.S. inflation data for October showed an increase from 2.4% in September to 2.6% in October. This result is owed to a base effect that was generally in line with expectations and provided the US dollar with an additional boost. While the data does not rule out further interest rate cuts by the U.S. Federal Reserve, it could support those advocating for a slower pace of rate reductions. Currently, nearly 80% of economists anticipate a 25 basis point cut in U.S. interest rates on December 18, while around 20% expect rates to remain unchanged. Broader market participants seem to share a slightly different view, reflected in recent weeks; the yield on 10-year US government bonds has risen sharply. Following President-Elect Trump’s vic-tory in the presidential race, U.S. bond yields rose to their highest level since the Federal Reserve cut interest rates in July, approaching 4.5%. In Germany, long-term bond yields have likewise increased, though to a lesser degree. Ten-year Bunds, which had a low yield of 2.04% at the start of October, are now yielding 2.38%. In contrast, Swiss Confederation bonds have remained relatively stable, with their yield only increasing slightly from a low of 0.34% in early August to 0.37% as of Wednesday.

U.S. Interest Rate Cycle

Already prior to the final election results, the U.S. central bank announced further interest rate cuts, although it did not clarify the rationale behind this decision. Futures traders are anticipating an additional rate cut of 25 basis points on December 18, followed by a pause in January, with another cut expected in March. However, given Donald Trump’s tariff policy, I believe that futures traders’ expectations may be over-ly optimistic. The rate cut cycle is unlikely to go on and on and should conclude even-tually unless a recession occurs, which is not currently projected.

Goldman’s View

However, economists at Goldman Sachs remain unconcerned. Despite the recent US inflation figures, they maintain their yield target of 3.85% for 10-year US govern-ment bonds by the end of December. Observers note that this would effectively rep-resent a real decline in interest rates over the upcoming weeks. However, the situa-tion does not appear to be trending that way at the moment. The legendary Franz Beckenbauer once said, ” Let’s take a look, and then we’ll see” (freely translated).

Energy and Prosperity and a Question for the Weekend

With a newly appointed government in the U.S. and an expected change in govern-ment in Germany, early elections will be held in February 2025; I wonder what the impact on energy production and consumption will be. This change may bring a new perspective on the issues of energy production and consumption. Statistics show a clear correlation: as a country’s GDP per capita increases, so does its energy de-mand. In other words, prosperity is closely tied to energy availability. Electric vehi-cles, KI, still growing population, etc., demand high and continuous levels of (electric) energy. Where should this come from? Let me know your views.

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

Good Morning Ladies and Gentlemen

”Power without abuse loses its charm.”

Paul Valéry

Finally

The US election campaign seems to have lasted forever, but it finally ended this week. On Tuesday, November 5, voters decided that former President Donald Trump would succeed President Joe Biden in the White House. They also determined the future composition of the Senate and, to a large extent, the House of Representatives.

Interest rate cuts in the U.S.

On Thursday, Federal Reserve Chairman Jerome Powell and his team lowered the interest rate by a quarter point, bringing it to a new range of 4.5% to 4.75%. This marked the second step in the interest rate change that began in September of this year and occurred just two days after the presidential election. Most analysts had anticipated this 25 basis point cut, so it was no surprise.

…and in the UK.

The Bank of England’s Monetary Policy Committee also voted to reduce interest rates from 5% to 4.75%, marking the second reduction this year. Bank of England Governor Andrew Bailey reaffirmed his stance on gradual interest rate cuts, stating that borrowing costs should continue to decline as long as the economy develops in line with expectations.

Lower interest rates are good for risk assets

As I mentioned in one of my previous “Stefan’s Weekly” updates, rate cuts, i.e. lower interest rates, are generally favourable for financial markets, particularly for risk assets.

Chaos and order / Paul Valéry

Society fluctuates between chaos and order, and both extremes threaten its existence. Paul Valéry’s unique perspective is that he does not view the “disorder of modernity” as a problem to be fixed. Instead, he sees it as a captivating phenomenon that should be preserved. This appreciation for and celebration of modern disorder was uncommon during Valéry’s time (1871 – 1945), and it remains unusual today, especially in an era with a strong desire for order and stability.

Another last thought before the weekend

With Paul Valéry’s thoughts in mind and confidence that while short-term noise can significantly impact stock market activity, global financial markets ultimately adhere to economic principles over time, I look forward to the exciting times ahead.

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