Finally

Good Morning Ladies and Gentlemen

After Wednesday’s Fed meeting, hope germinated for a temporary end to the wave of selling on the financial markets. On Thursday, the tender plant of this budding hope was destroyed by the interest rate hike by the Swiss National Bank.

Falling Financial Markets

Few people are happy about falling financial markets. I also do not belong to the cohort of financial market participants who enjoy falling prices. Nevertheless, I am always pleased to be able to invest in quality stocks at lower prices. The day before yesterday, I would have thought that much of the negative news of the past few months was priced in and that we should see a calming down in daily volatility. Now, Ladies and Gentlemen, this was unfortunately not the case. Yesterday, the fear of boisterous inflation triggered by an interest rate hike by the Swiss National Bank weighed heavy on financial markets again.

Finally

Switzerland is widely regarded as a haven of financial stability, and with inflation (CPI) at just over 2% (2.386 to be precise), yesterday’s 0.5% increase in the base rate may have seemed a bit extreme. Yet, unlike in other G 20 nations, the base rate in Switzerland will still be negative by 0.25% after the 0.5% base rate increase. This is why (although I did not like seeing markets trading lower on Thursday) my initial reaction was: «finally»! Negative interest rates are not sustainable and create all sorts of issues, leading to a misallocation of capital, they should, if at all, only be introduced temporarily. In addition to this step, the Swiss National Bank acted independently from the European Central Bank, which again I think is a good sign.

This time is different

This time is different, Ladies and Gentlemen, or maybe not? Downward movements in financial markets are unpleasant and bear the potential to instil fear. However, if this time is no different to other times, eventually, financial market participants will look forward, markets will calm down and over time move up again. Once all the negative news is priced in, once the light at the end of the tunnel can be seen, market participants will feel confident enough to pick up stock. Whether this will happen at the current or lower levels and at what time of the year is beyond my ability to predict. Nevertheless, it looks pretty likely to me that it will eventually happen. In the meantime, I am enjoying dividends from companies that have held on to paying dividends for decades under the most challenging circumstances.

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, a great weekend, and above all, peace!

Yours truly,

Stefan M. Kremeth

Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li