A Year of Contrasts

In several respects, 2023 is a year for the history books for the financial markets. Interest rates on the bond markets reached their highest level since 2007; the era of zero and negative interest rates, which had shaped the past nearly 15 years following the global financial crisis, seems definitively over for now.

Roche and Nestlé weigh on the Swiss market

Stock markets that are usually considered safe havens in turbulent times, first and foremost the Swiss SMI, were unable to escape the turmoil of the past year. On the contrary, they were sometimes hit hardest by the dwindling risk appetite. The SMI heavyweights Nestlé and Roche, at least in earlier years the epitome of stability and defensive character, fell by -6.70% and even -12.80% respectively last year, pulling the Swiss benchmark index down. The SMI ended the year with a comparatively weak return of +3.80%. Roche has now lost more than 39% since its peaks in April 2022. The focus is currently being placed on the negative – and this is not only the case for the Basel-based pharmaceutical giant. The weak share price performance can be explained by a series of disappointments from clinical trials over the past two years, as well as missing out on the currently hottest topic in the pharmaceutical industry: weight-loss drugs.

Additionally, suddenly competitive interest rates on government bonds are likely to have taken a toll on many defensive stocks (consumer goods and healthcare stocks), as investors often used them as substitutes for fixed-income securities.

Inflationary pressure is easing

Meanwhile, central banks were able to claim victories in 2023 in the fight against inflation. Consumer price inflation receded successively over the course of the year. Core inflation rates, excluding energy and food, are behaving more sluggishly than the broad inflation barometer, but are also pointing in the right direction. In China, the world's second-most important economy, tough deflation is already prevailing. This could have a positive impact on the Western world this year, as imported goods become or already are cheaper.

For the financial markets, it is now clear: the global interest rate hike cycle has come to an end. For the coming year, six rate cuts by the US Fed of 0.25% each are already priced in on the futures markets. Accordingly, the first rate cut is expected to be decided at the Fed meeting on March 20, and the Fed Funds Rate is projected to fall from its current 5.50% to 4.00% by the end of 2024.

The Swiss franc against (almost) everyone else

The prospect of a turnaround in US Federal Reserve interest rates has put pressure on the dollar. The USD depreciated by 8.99% against the Swiss franc in 2023. The Euro did not fare much better, with a loss of 6.12% against the Swiss franc.

Cryptocurrencies return with a brilliant bull market

Bitcoin manages to multiply by two and a half times to over $42,000. Ethereum gains 100%. The eventual introduction of Bitcoin/Ethereum ETFs as well as the upcoming Bitcoin "halving" in spring promise exciting prospects for the crypto sector.

Outlook for 2024

The interest rates, which are likely to fall again soon worldwide, should especially boost the hard-hit stocks of small and medium-sized enterprises.

As always, we thank you for the trust placed in us and we look forward to investing together in 2024!

"The most realistic distinction between the investor and the speculator is in their attitude toward stock-market movements. The speculator's interest is mainly to anticipate and profit from market fluctuations. The investor's interest is mainly to acquire and hold suitable securities at suitable prices." Benjamin Graham, British-American economist and investor (1894–1976)