Category: Stefan’s Weekly

Good Morning Ladies and Gentlemen

”Art is like oxygen.”

Marina Abramović

Rising yields?

I was asked why yields are rising in the U.S., and I am happy to share my view. It seems many market participants are selling some of their bond holdings before the elections (= yields are rising) as a hedge against a Trump election victory. Although Donald Trump wants to stimulate the US economy, he also wants to significantly expand and increase tariffs on imported goods. This would consequently increase the US inflation rate, which would cause yields to rise.

Does the economic data support rising yields?

The latest data for the third quarter, published on Wednesday, shows that the net investment ratio of US companies was on the verge of falling in the spring but is now turning around again. The U.S.’s gross domestic product (GDP) grew by 0.7% compared to the previous quarter (2.8% annualised). Therefore, the soft landing of the economy that so many observers had been waiting and even hoping for could materialise, and if it does, it will probably happen shortly after the elections. Meanwhile, the rise in government bond yields will likely end in anticipation of the US elections. However, this week’s solid economic data also suggests that the US Federal Reserve will be in no hurry to increase the pace of interest rate cuts.

What about the EU?

Yes, Ladies and Gentlemen, that is a valid question. Spain is driving the economic bloc in the EU, while Germany is slowing down. Wednesday’s numbers for Q3 show that the differences between the major economies have widened. The eurozone’s GDP increased by 0.4%, with French GDP growing at the same rate. On the other hand, Italy only managed a red zero, and although Germany’s GDP increased by 0.2%, this was not enough to compensate for the more substantial decline in spring, which was revised downwards from -0.1% to -0.3%. Germany’s economic output is currently 0.1% lower than in Q1 2024 and just 0.15% higher than at the end of 2019. This marks the third consecutive year of stagnation following Russia’s invasion of Ukraine and the resulting energy crisis in Germany. I found some interesting comparative figures highlighting the challenges Germany’s economy faced over the past five years, i.e., before Russia’s invasion of Ukraine and the current government’s tenure. Since the end of 2019, France’s GDP growth has outperformed Germany’s by 3.9%, Italy’s by 5.4%, Spain’s by 6.5%, and the United States GDP growth was a hefty 11.3% higher than Germany’s.

The positive twitch

Lack of growth in the European Union may increase the chances that the European Central Bank will lower its key interest rates by 0.5% in December. I would not be surprised to see the Swiss National Bank act accordingly.

Elections’ Impact on Financial Markets

Over four billion people, about half the world’s population, are being called to vote this year. One of the significant events in this super-election year is the U.S. Presidential Election. However, elections in Brazil, India, Indonesia, and the European Union have not significantly impacted their respective stock markets. It can be assumed that the same will hold for the U.S. Economic growth remains the critical factor influencing stock market performance. However, in the short term, I would not exclude a rumble in the jungle after another dirty U.S. election campaign.

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

”Maturing hurts.”

Richard David Precht

Entitlement Society: last week’s topic

Thank you all for the emails I have received. Many people shared their thoughts in response to my views on an entitlement society, and I genuinely appreciate it. I was especially pleased that I am not the only Supertramp fan out there.
Now, please allow me to add one more personal thought before getting into today’s topic. I believe one major issue is the “share and like buttons” on social media, which have likely been the most significant revolution in social dynamics in the past decade. This has resulted in competition in areas older generations did not have to contend with as much. Ladies and Gentlemen, I realise I am generalising, but consider this: if your happiness is at least partially dependent on being liked by your online followers or if your posts are shared or liked, life can become quite frustrating if you or your posts do not receive the attention you seek or believe to merit. If likes become the new currency and represent a means to self-realisation, humanity is up for some tough years. If people focus more and more on self-realisation and neglect meritocracy, we should anticipate reduced prosperity in the future. Simplified? Yes, most probably, but there is a point, no?

Beige Book

As usual, the U.S. Federal Reserve is preparing for its upcoming meeting by reviewing the “Beige Book,” which summarises feedback from the twelve regional central banks nationwide. This report outlines the current economic conditions in their respective areas. According to the latest survey released by the Federal Reserve two days ago, economic activity in the U.S. has seen little change across almost all districts since early September. While two districts reported slight growth, most reported a minor decline in manufacturing activity. Overall, employment has increased slightly, with more than half of the districts noting slight or moderate growth, while others experienced little to no change. Many districts also indicated low labour market turnover rates. Inflation has remained mild, with sales prices rising slightly in most areas. The next U.S. Federal Reserve meeting will occur on November 6 and 7.

Uncertainty

Empirical evidence suggests that the stock market tends to perform more favourably during the tenure of a Democratic President. However, this observation is not widely regarded as conventional wisdom within public discourse and is still a statistical fact. For the time being, there is uncertainty. Who will be elected, and what will be the impact on the economy? This uncertainty prevails until we have solid polls or first election results. Because market participants do not like uncertainty, financial markets may still be a little rocky for the next 10 days.

Strong period ahead

However, it’s important to note that the historically best six-month period for the Dow Jones Industrial Average (DJIA) is approaching. This period runs from November 1 to April 30. Since 1980, there have only been six instances where this timeframe ended with a loss. The most significant decline recorded during this stretch was -12% from November 2008 to April 2009. Statistically, one should not be short of the DJIA during that period.

Year-end rally?

Do I think there can be a year-end rally? Yes, why not? With the statistically robust period ahead, the uncertainty about the U.S. elections disappearing in 10 days, and potential further interest rate cuts due to low inflation in a still favourable economic environment (Beige Book), a year-end rally seems possible to me.

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

”Anyone can make it, but not everyone.”

Gerd Ziegler

ECB

Before we dig into today’s somewhat philosophical topic, let us quickly look at what happened on the interest rate front. Yesterday’s European Central Bank (ECB) meeting resulted in the widely anticipated 25 basis point interest rate cut. Another 25 basis point cut is also expected for the December meeting. Based on Futures prices, four additional interest rate cuts of 25 basis points each are awaited in 2025. The ECB’s target range by autumn 2025 is 2%. However, that remains to be seen. I am not sure if, at the end of next year, we will see rates below 2%. Anyway, some weeks ago, I wrote that interest rate cuts are positive for stock markets under normal circumstances. This is still the case! And now, Ladies and Gentlemen, enjoy today’s topic.

Today’s Topic: my very personal view!

I perceive a shift from a meritocracy to an entitlement society. Nowadays, it seems, people believe in being entitled to a successful career, a good life, good health, an attractive, intelligent partner, and everything else others may have or may not have. This was different in the past. In the feudal system, only the nobility had the privilege of a good life. Everyone else knew they couldn’t demand much in this life, but if they were decent and submissive, they believed in a good afterlife or heaven. Regardless of desire or merit, having noble blood was the only chance to succeed.

Capitalism

Capitalism has brought significant changes to society. In theory, there are no glass ceilings anymore, and everyone now has the opportunity to succeed, at least in Western and some other more or less capitalistic societies. However, as a result, people now feel entitled to success, whether they deserve it or not. Capitalism has led to widespread prosperity for large global populations. Yet, it is not evenly distributed and not even present everywhere. Despite this, many more people have a better life today than 20, 50, or 100 years ago. Nevertheless, because not everyone succeeds despite the opportunity, frustration builds, leading to envy, anger, fear, and the desire to find someone to blame for one’s failures and maybe even to seek retribution against them.

Frustration

When ruthless politicians, ruthless gurus, ruthless people in general and criminals manipulate the frustration, envy, and fear of those who have not succeeded by, for example, blaming immigrants, warning of inflation, predicting bank failures, and forecasting a collapse of the financial and political system, managing such fears, they can offer themselves as saviours to those who cannot see beyond the claims. To me, this is nothing more than a fear-based agenda for power, leading to a loss of prosperity for those who need it most. I see repeatedly that even quite sensible people hold views and beliefs that are neither scientifically proven nor would have been morally/ethically justifiable until a few years ago. I think they are prone to disappointment, and I wonder what life has done to those people and where their inner compass has gone.

“I said dreamer, you’re nothing but a dreamer.”

Supertramp

Quote and conclusion

Looking for the culprits does not make sense, but I hope humanity will realise the potential for positive action. Naïve? Yes, probably. Do I care? Nope, not at all!
”Anyone can make it, but not everyone.” This, Ladies and Gentlemen, is probably and, unfortunately, true, and I cannot think of a way to change it. To me, the best, however not flawless, system is an open and liberal democracy where the people can elect politicians and vote on substantive issues. In my opinion, the promise that everyone can make it in an open, reasonably democratic society of capitalist characterisation still stands, but everyone has to do it for themselves; the government cannot do it for its citizens, no matter what frivolous politicians will promise in exchange for some votes. Those who believe the state can do it for them are nothing but dreamers, and by the way, never forget that the flow of people follows the flow of capital because everybody seeks a share of that capital.

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

”It would also be nice if I were 6’2”, had a full set of hair, and stayed an even 190 pounds throughout adulthood. However, all these wishes are pipe dreams, so we need to make do with what we have.”

Kevin Muir (the MacroTourist)

Update

Already Q4 again. I have the impression that the quarters are simply passing us by, and thus, I figured sending you an update on the Incrementum 2024 Year-End Competition would be appropriate. When I was writing this “Stefan’s Weekly”, the prices for the S&P 500 stood at 5’793.81 Points, higher than in June; gold at 2’627.39, way higher than in June and Nvidia at 134.94, look that, lower than in June.

S&P

The highest bet on the S&P still comes from Dario, at 5’651; Barbara’s bet is only one point behind (5’650), and the lowest, at 4’000, comes from Attila. The S&P even outperformed the most bullish bet.

Gold

So far, Hans’s highest bet on gold is 2’500, and Barbara’s lowest is 2’050; what’s true for the S&P is certainly true for gold. Gold even outperformed the most bullish bet.

Nvidia

Okay, Ladies and Gentlemen. Barbara’s highest bet on Nvidia is 1’250, and Adrien’s lowest is 195 a, before the split. For me, almost anything is possible in this stock. But it looks more like a closing above Barbara’s bid.

My bets

I like to be transparent, so my bets are still gold 2’250, Nvidia 999, and the S&P 5’220.

Fingers Crossed

I’m keeping my fingers crossed for all of you, and I look forward to sending this one-ounce silver coin to the winner at the end of the year.

Food for thought

In an upcoming “Stefan’s Weekly,” I want to discuss what I see as a shift in society from a meritocracy to an entitlement society. We need to be realistic about this, as I believe that some people want to receive things without putting in the necessary effort. This idea seems completely unfeasible to me.

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

”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

Good Morning Ladies and Gentlemen

”Honi soit qui mal y pense”

The motto of the English Order of the Garter

Chinese Central Bank

On Tuesday, the Chinese financial supervisory authority provided a considerable tailwind with the announcement of several measures. For example, the minimum reserve requirements for banks are to be lowered by 50 basis points, and mortgage interest rates are also to fall. These steps are primarily aimed at stimulating slow economic growth; however, the People’s Bank of China (PBOC) also intends to use its stimulus program to stabilise the Chinese real estate sector and stock markets. The announcement of these economic stimulus measures by China’s central bank has led to a global increase in share prices.

Bank of America

According to Bank of America (BofA), solid labour market reports and PMI data could trigger a rally in stock prices. BofA believes good news is generally good for equities and that positive surprises in both data should be a tailwind for stocks. Investors will, therefore, closely monitor the non-farm payroll reports for September and October, to be released on October 4 and November 1, respectively. The big week of third-quarter earnings from October 21 to 25 could also be a significant market catalyst. However, technically, November 6, the day after the U.S. presidential election, is probably the most important day for the stock market. BofA estimates that the S&P 500 will move 2.5 per cent either way on that day. Therefore, the 6th of November 2024 will be significant for investors because, with a clear winner, markets will begin to price in future policies during the 47th president’s four-year term. The stock market experienced a similarly large move the day after the last presidential election when President Biden won; the S&P 500 rose by 2.2% on 4 November 2020.

The Swiss National Bank

The Swiss National Bank (SNB) has reduced the key interest rate from 1.25% to 1%. The tone of its announcement was unexpected, as it highlighted multiple times the decreased inflationary pressure in Switzerland. In August, the annual consumer price inflation was at 1.1%. Today, the monetary authorities stressed that Swiss inflation is expected to be significantly lower than previously thought, with a projected average inflation of just 0.6% in 2025, a significant decrease from their June forecast of 1.1%. For the first time, the SNB indicated that further interest rate cuts are likely necessary to ensure price stability in the medium term. This indicates a departure from combating inflation, as the SNB is now ready to take all necessary measures to prevent Switzerland from falling into a deflationary state.

Ronni’s Trip to the U.S.

As summer draws close each year, my partner Ronald P. Stöferle travels to the U.S. to speak at a conference and gain insights into the precious metals market. You can find his gold and gold miners analysis by following the link below. I highly recommend taking the time to look at it and gaining Ronni’s perspective. Enjoy:
https://mcusercontent.com/b268a38a165b03979d95268dd/files/151d72b7-01bb-5cc2-f8a2-fb614f7f6d57/Incrementum_2024_09_Notes_from_the_Road_EN.pdf

Interesting political development in Iran

According to the Guardian, Iranian President Massud Peseshkian recently expressed Iran’s disapproval of Russia’s actions against Ukraine, stating, “We have never supported Russian aggression against Ukraine”. Peseshkian also conveyed Iran’s readiness to resume the 2015 nuclear agreement, emphasising, “If the commitments of the agreement are implemented in full and in good faith, the dialogue can be extended to other issues,” as reported by Reuters. According to Peseshkian, Iran stands for peace and does not intend to engage in conflict. “Honi soit qui mal y pense”! Well, it almost seems Iran feels somewhat under pressure, groaning under the sanctions of the West. Anyway, if the nuclear agreement could be resumed, that would definitely be appreciated and hopefully lead to political relaxation in the entire Middle East.

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 fear that there is no voluntary return in the history of mankind.”

“The Count” in Robert Musil’s The Man Without Qualities (first edition)

U.S. Federal Reserve

The U.S. Federal Reserve Bank has responded to the recent slowdown in inflation by implementing its first key interest rate cut in over four years. On Wednesday, the Fed reduced the interest rate band by 0.5% to 4.75% to 5%. This significant cut is accompanied by indications from the U.S. central bank of further interest rate reductions this year. While a more relaxed monetary policy was expected, there needed to be more certainty about whether the central bank of the world’s largest economy would opt for this substantial interest rate cut or take a more cautious approach by only reducing interest rates by 0.25%. In last week’s “Stefan’s Weekly,” I anticipated a 0.25% reduction, which was also reflected in future prices at that time.

Why financial markets like interest rate cuts

Rita asked me why I had written in my last “Stefan’s Weekly” that interest rate cuts are great news for financial markets. The reason is, that the recent significant interest rate cut by the US Federal Reserve and the two cuts by the European Central Bank are positive news for the economy. Reduced interest rates translate to lower costs for short-term loans. Investors and economists anticipate that lower interest rates can stimulate economic growth because it becomes more advantageous for individuals and companies to borrow money. Consequently, companies can achieve higher profits, making the economy more resilient. Consumers are likely to increase their spending as lower interest rates make them feel more financially capable of making major purchases or investing in their children’s education. Businesses can also capitalise on lower interest rates by securing more favourable financing for their operations, acquisitions, and expansions, potentially leading to increased future profits and higher share prices. Sectors that offer high dividends and businesses requiring substantial capital stand to benefit the most from lower interest rates. Nevertheless, companies with steady cash flows and strong balance sheets can also gain from more advantageous debt financing.

Next week

The good news is that there is more to come; at least, that is what I think. The Swiss National Bank will probably be the last to cut interest rates this month. Next week, I expect them to lower base rates by 0.25%.

My Thoughts for the Weekend

Ladies and Gentlemen, progress should only be considered meaningful if it contributes to added value and, notably, increased prosperity for the general population. Additionally, the traditional understanding of right and left in politics needs to be re-evaluated, as the population appears much more fragmented in many aspects than it was during the last decades. We may need new parties alongside established ones with new offerings. I often wonder if things are as grim as many people perceive them to be or not as dire as they appear. However, living in Switzerland and working in Liechtenstein certainly influences my thinking and my point of view.

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

G

Good Morning Ladies and Gentlemen

”More jargon equals more bullshit, and more bullshit equals more billable hours.”

Phil Elwood

Cut Number 1

As anticipated, the ECB has reduced the deposit rate by 0.25% to 3.5%. This action positively influenced European financial markets, while currency markets remained relatively stable. Following ECB chief Christine Lagarde’s remarks on future interest rate policy, the euro strengthened further. She indicated that the ECB would base its decisions on meeting-to-meeting data and refrain from committing to a specific interest rate trajectory. I am not the biggest ECB fan, but this makes sense to me.

Cut Number 2

The Ministry of Labour announced in Washington Yesterday that initial jobless claims rose by 2,000 to 230,000. Economists had expected an average of 226,000 applications. The previous week’s figure was revised slightly upwards by 1,000 to 228,000. Financial markets pay close attention to jobless claims because they are considered a timely indicator for the US labour market. The US, the labour market plays a vital role in the Fed’s monetary policy decisions. These increases are relatively moderate and, thus, not an indicator of a weakening economy. The Fed’s expected interest rate cut will be added to yesterday’s ECB cut next week. I currently expect a reduction of 0.25%, which is reflected in future prices.

Cut Number 3

Let us examine the Swiss National Bank. The SNB key interest rate currently stands at 1.25%, effective 21 June 2024. In Switzerland, there has been a consistent decline in inflation over the past few months. In August 2024, consumer prices in Switzerland rose by 1.1% compared to last year, remaining unchanged from July. In December 2023, the Swiss inflation rate was recorded at 1.7%. There is a strong possibility that Thomas Jordan, the President of the board of directors, will lower the base rate at his final policy meeting before retiring at the end of September.

Financial markets like interest rate cuts

In general, a decrease in interest rates, known as interest rate cuts, creates a more favourable environment for stocks. The question is, of course, to what extent the markets have already factored this into their pricing.

What is a high-quality company?

I am often asked what a high-quality company is and how I go about choosing companies to invest in. Well, Ladies and Gentlemen, defining a high-quality company is complex. Quality encompasses many factors that should be evaluated from a long-term perspective spanning several years. Profitability is critical; the company must consistently generate profits to cover costs and facilitate sustainable long-term growth. Strong innovation, a solid market position, and competitive pricing contribute to robust profitability. Quality companies are distinguished by their ability to achieve sustainable development. It’s vital to balance investing in expansion and nurturing existing business areas. Excessive growth can strain a company’s financial reserves, so prudent financial management is essential. A solid balance sheet is another hallmark of a quality company. Managing growth to maintain a healthy balance sheet is critical to mitigate the risk of bankruptcy from excessive debt. Positive free cash flow and a healthy balance sheet are strong indicators of a company’s financial strength. It demonstrates the cash available to the company after covering all operating expenses and investments. Positive free cash flow provides a company with flexibility, enabling it to consider options such as debt repayment, dividends, or further expansion. These are my primary considerations.

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

 
<p style=”text-align: center;”><em>”There may be more beautiful times, but this one is ours.”</em></p>
<p style=”text-align: center;”><strong>Jean-Paul Sartre  </strong></p>

<h3><strong>ISM</strong></h3>
On Tuesday, the stock markets declined following Monday’s Labor Day closure. Tech stocks, susceptible to economic changes, were impacted by discouraging sentiment data from the industry. The Purchasing Managers’ Index from the Institute for Supply Management (ISM) continued to indicate an economic downturn. However, it is anticipated that this decline will be brief, with investors eagerly awaiting the potential interest rate reductions by the Federal Reserve in the coming days.
<h3><strong>The Fed’s Path Forward</strong></h3>
The current target interest rate the Federal Reserve sets ranges between 5.25% and 5.5%. Since mid-2023, short-term USD interest rates have remained at this level. The Fed has maintained a firm hold on the rates despite a notable decrease in inflation. However, it seems a shift may be underway. During this year’s Jackson Hole meeting on August 23, Fed Chairman J. Powell surprisingly suggested that inflation risks were in check and that the Fed might consider lowering the key interest rates. The interest rate policy will likely emphasise the labour market, which has recently shown weakness. The likelihood is high that the US Federal Reserve will decrease the key interest rate by 0.25 percentage points at the next interest rate meeting on September 18.
<h3><strong>Today’s Economic Indicators</strong></h3>
Today, several macroeconomic indicators are being released in the U.S. These indicators provide essential information about the labour market in the world’s largest economy, which has been losing momentum in recent months. The indicators include the unemployment rate, the number of employees outside the agricultural sector, and hourly wages.
<h3><strong>Conclusion</strong></h3>
Once again, everything boils down to perception. If market participants view today’s numbers favourably and refrain from raising concerns about the US economy losing momentum faster than the Federal Reserve intends, markets will experience an upturn. However, if market participants perceive today’s numbers negatively, with concerns about a significant economic downturn, markets will decline, at least in the short term.
<h3><strong>Ladies and Gentlemen</strong></h3>
As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to <a href=”mailto:smk@incrementum.li”>smk@incrementum.li</a>

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

“Life is unfair, but remember, sometimes it is unfair in your favour.”

Peter Ustinov

Germany’s Economy

Germany currently needs help with demand. The latest data on the country’s gross domestic product in the second quarter clearly shows that consumption and exports must improve. The weakness in consumption is attributed to a decrease in purchasing power caused by inflation. In real terms, employees earn 2.6% less in gross wages after adjusting for inflation compared to mid-2021. Additionally, real wages fell by 1% in the second quarter alone. The weakened consumption is particularly concerning because 75% of companies rely on domestic sales. While export earnings can contribute to job creation, a growth of approximately 10% annually is necessary to make a noticeable impact. However, exports are stagnant, and the export outlook worsened in August.

Macro Call

I do not consider myself a macro investor. As I have mentioned previously, I have reservations about the accuracy of most macro calls. In my opinion, attempting to forecast the market and make assumptions about economic developments seems akin to fortune-telling. I am a bottom-up investor. I focus on identifying sound companies trading at reasonable valuations that yield positive cash flows. Typically, I include 25 to 40 such companies in the portfolio, capitalise on dividends, and adjust the portfolio by rebalancing, adding new companies, and divesting others. This investment approach has proven effective for me and our private clients. The approach may seem a bit boring, and it certainly does not offer instant gratification, but it delivers sensible returns over time.

Bad News Creates Opportunities

As I assess the current macroeconomic conditions in Germany, it seems to me that market participants are perhaps overreacting by selling off strong German industrial companies at undervalued prices. While the reasons for this reaction are not surprising, given the prevailing uncertainty stemming from sluggish economic growth in the USA, China, and Europe, as well as comparatively high interest rates in various regions, I perceive potential opportunities within this environment, which, Ladies and Gentlemen, leads me to question whether this is now a matter of a macro call or a thorough bottom-up approach.

German Cars

In this week’s edition of “Stefan’s Weekly,” the headline asks, “Are you considering purchasing a new car?” This question is timely because of the recent rise in new car prices, causing consumers to be more careful with their spending, even more so in these challenging economic conditions and the still high interest rates, which has resulted in credit financing and leasing becoming more expensive, potentially reducing the desire to make a purchase. As a result, the automotive market is currently more favourable for buyers. There is no longer a supply shortage, purchase incentives are increasing, and transaction prices are decreasing.

An Opportunity?

The bi-weekly Swiss financial newspaper “Finanz & Wirtschaft” addressed the topic in its Wednesday edition. No significant improvement in the global car market environment is expected in the short term. Given the weakening demand in all leading markets, it is doubtful that the current year’s production forecasts will be maintained. However, looking beyond this, the picture is brightening. The economy appears to have bottomed out, and there are initial signs of improvement. Furthermore, more interest rate cuts by central banks are expected, especially in the USA. When the economy is weak, purchases are postponed, but purchases are made when the situation brightens due to the early cyclical nature of the sector.

A Question of Valuation

Volkswagen and Stellantis trade at a 2025 P/E of 3, BMW and Mercedes at a P/E of 5. Even if the forecasts have to be reduced in the weeks and months to come, the P/Es will go up accordingly; compared to Nvidia, whose stock is trading at a 2025 P/E of over 70, the German car sector seems cheap. We are patient investors and are, therefore, looking a bit closer at the industry.

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