Category: Market Updates

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Political events

August was marked by a significant shift in global monetary policy and ongoing geopolitical tensions.

The Federal Reserve, under Chairman Jerome Powell, signaled a policy pivot, indicating the start of an interest rate easing cycle in September. Powell’s statement at the Jackson Hole summit emphasized the need for monetary adjustment, sparking market optimism. Other central banks followed suit, with many hinting at further rate cuts, except the Bank of Japan, which raised rates by 25 basis points. This hike caused major disruptions, particularly in Japan’s markets, where the unwinding of carry trades led to a sharp decline in equities​. Investors, who had borrowed yen at low rates to invest in higher-yielding assets, were forced to close their positions as the yen appreciated, leading to widespread sell-offs and volatility.

Geopolitically, the Middle East witnessed a deterioration in its fragile ceasefire, and Ukraine made territorial gains in Russia’s Kursk region, raising concerns about further escalation. U.S.-China relations saw a positive turn with high-level dialogues, but the overall global political climate remained tense​.

The situation on the markets

Despite early volatility, global equities rose by 2.5% in August, while global government bonds returned 1.0%​. The market’s early struggles were attributed to fears of a U.S. economic slowdown, sparked by weak labor market data and a disappointing manufacturing performance. However, these concerns were alleviated as investors anticipated the Fed’s rate cuts, driving a recovery in both equity and fixed income markets. The VIX index, which measures market volatility, spiked early in the month before stabilizing​​. By the end of August, global markets had rebounded. The S&P 500 rose 2.4%, supported by broader earnings growth outside of the tech sector, while European markets, particularly France, saw a modest recovery thanks to the Olympics-related boost in services. However, cyclical sectors remained weak, and Japan faced significant challenges due to the Bank of Japan’s policy change​.

The impact on the asset classes equities and bonds

Equities

The equity market experienced heightened volatility, especially in Japan, where a 12% single-day drop on August 5 marked the largest decline since 1987. U.S. equities, led by the S&P 500, were initially impacted by the retreat of big tech stocks and concerns over economic data, but a solid earnings season and anticipation of rate cuts led to a recovery​.

Asian markets showed resilience, with the MSCI Asia ex-Japan and emerging markets delivering positive returns, supported by expectations of a weaker U.S. dollar and Fed easing. However, Japan remained an outlier due to the carry trade unwind and yen appreciation​. While European stocks did experience a rebound in August, their performance trailed U.S. and Asian counterparts due to a less favorable economic backdrop and slower corporate earnings growth in key sectors​​.

Bonds

Fixed income assets benefited from the market’s flight to safety at the start of the month, with U.S. Treasuries outperforming as expectations for aggressive Fed rate cuts mounted.

The Bloomberg Global Aggregate Index posted strong gains, with global investment-grade bonds returning 1.9%​. High-yield bonds also delivered positive returns, though they lagged behind their investment-grade counterparts. European bonds saw moderate gains, while Japanese government bonds rallied due to strong domestic demand​.

Emerging market debt outperformed, bolstered by a weakening U.S. dollar, which provided a tailwind for the asset class. As a result, emerging market debt posted returns of 2.3%​.

What are the implications for the Everon portfolios?

Overall, the Everon portfolios performed positively in this volatile month, which was characterised by an abrupt start with some significant losses on the stock markets and a rapid recovery. Both the global markets and the Swiss markets were able to recover from the cold start to the month. The performance of almost all Everon strategy lines was slightly positive at up to +1.2%.

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Political events

The escalation of the ongoing conflict in Gaza affected global oil prices and market sentiment, as investors remained cautious about potential disruptions in oil supply routes. The persistent war in Ukraine continued to have significant impacts on European security and energy policies, contributing to volatility in European markets. The conflict is posing ongoing challenges for EU nations, which have to balance support for Ukraine with the need to maintain their own economic stability.

The European Union held pivotal elections, which were crucial in shaping the future political landscape of Europe. These elections had significant implications for EU policies on economic recovery, immigration, and climate change. The results led to shifts in power within the European Parliament, altering the balance between pro-EU and eurosceptic parties.

The situation on the markets

The US economy added more jobs than anticipated, with 272’000 new jobs created. Despite this job growth, the unemployment rate edged up slightly to 4.0%. Wage growth remained strong, contributing to persistent inflationary pressures. Inflation showed signs of moderation, with the core Consumer Price Index (CPI) rising by 3.4% year-over-year and the core Personal Consumption Expenditures (PCE) index increasing by 2.6%​.

The European Central Bank (ECB) implemented its first interest rate cut since 2019, lowering the key rates by 25 basis points. The Federal Reserve maintained its benchmark rate at 5.25%-5.50% but signalled potential cuts later in the year. Despite earlier expectations of potential rate cuts, the Fed signalled that easing might be postponed but not ruled out.

The impact on the asset classes equities and bonds

The ECB’s rate cut significantly influenced European equities, while the S&P 500 and other major US indices saw continued strength supported by robust corporate earnings and favorable economic indicators.

Equities

France’s CAC 40 saw a rise of 2.5%, while Germany’s DAX increased by 3.0% as the market responded positively to monetary easing measures. The S&P 500 rose by 3.5% and the Nasdaq by 6.1%, continuing its upward trend from previous months. The Dow increased by 1.1%, reflecting steady, albeit slower, growth compared to other major indices. The Swiss indices moved sideways.

Bonds

Yields on US Treasuries fell, with the 10-year yield decreasing by 10 basis points to 4.4%. This decline was driven by lower inflation expectations and continued investor demand for safe-haven assets.

What are the implications for the Everon portfolios?

Most strategy styles developed slightly positively with a performance of up to 2%, whereby the strategies with a global focus outperformed those with a Swiss focus. The positive performance contribution of the bond component should also be emphasised. The allocations at both asset and individual security level were kept constant in June.

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Political events

Geopolitical tensions continued to weigh on market sentiments throughout May. Persistent conflicts in the Middle East and Ukraine contributed to increased market volatility, affecting both investor sentiment and commodity prices. Additionally, the introduction of new US tariffs on Chinese products, particularly in critical sectors such as semiconductors and electric vehicles, alongside heightened military activities around Taiwan, further exacerbated geopolitical stresses influencing market dynamics.

The situation on the markets

Central banks adopted a cautious approach in May. The Federal Reserve kept interest rates steady, indicating that any potential easing might be deferred but not entirely ruled out. Meanwhile, the European Central Bank took a more dovish stance, signaling preparations for possible rate cuts as early as June.

US GDP growth was revised downward to 1.3% annually, reflecting slower consumer spending and exports. Inflation data indicated a slight disinflation trend, with both core and headline CPI showing moderate increases.

In Europe, economic activity saw improvements, particularly in the services sector. The eurozone’s GDP grew by 0.3% quarter-over-quarter, benefiting of the relatively low equity valuations and positive surprises in corporate earnings.

Positive economic data from China helped boost market sentiment, despite ongoing issues with domestic demand and the real estate sector. In Japan, equity markets were affected by currency weaknesses, despite strong export performance.

The impact on the asset classes equities and bonds

May saw a robust recovery in global equities and a positive, though mixed, performance in bond markets. This resurgence was primarily driven by strong corporate earnings, particularly in the technology and utilities sectors.

Equities

The global stock market rebounded, with major indices experiencing significant gains. For instance, the S&P 500 rose by 5%, the Nasdaq climbed by 7%, and the Dow Jones Industrial Average increased by 2.6%. This rally was led by impressive performances in tech and utilities sectors, which gained 10% and 9%, respectively, fueled by advancements in AI and strong earnings reports.

Bonds

While bond markets showed positive overall performance, with global government bonds rising by 1.3% in USD hedged terms, they remained sensitive to economic data and central bank policies. Yields on US Treasuries fell slightly, reflecting cautious optimism and anticipation of future rate cuts.

What are the implications for the Everon portfolios?

The favourable developments on the markets also had an impact on the Everon portfolios. Performance in the equity segment was strongly positive in all strategies at up to +6.5%. We continued to keep the allocations in the various strategies constant with only moderate changes in the selection of individual stocks, with around 5 individual stock changes per region in the multifactor strategies.

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Political events

In April, heightened military confrontations between Israel and Iran significantly escalated tensions in the Middle East. These conflicts not only increased regional instability but also impacted global markets, particularly the oil sector, as concerns over potential supply disruptions grew.

Meanwhile, the G7 finance ministers convened in Italy to address pressing issues such as economic and energy security, migration, and fostering partnerships with Africa. The outcomes of this meeting are likely to influence broad economic policies among the world’s wealthiest nations, setting a strategic agenda for international economic collaboration and development.

Additionally, the International Monetary Fund (IMF) revised its global economic projections, holding steady its growth forecast at 3.2% for both 2024 and 2025. This forecast reflects a nuanced global economic landscape where advanced economies might see some acceleration, while emerging markets and developing economies could experience a slight slowdown, indicating a mixed pace of global economic recovery.

The situation on the markets

The Federal Reserve has opted to keep its interest rates unchanged, adopting a cautious stance as it anticipates potential rate cuts later in 2024. The European Central Bank and the Bank of England have also maintained their current rates, signaling that reductions might begin as early as June.

In the U.S., the economy shows signs of sustained recovery, with notable improvements in retail sales and industrial production. GDP projections continue to suggest growth rates above trends, indicating robust economic activity. In contrast, Europe presents a more varied economic picture, with differing performances across its regions.

Stock markets, which had previously been supported by the resilience of the U.S. economy and the expectation of falling interest rates, are now experiencing shifts in investor sentiment. Interest rate sensitivity has reemerged, particularly affecting small and medium-sized enterprises, companies with weaker balance sheets, and highly valued growth stocks, as the market adjusts to the evolving economic and financial outlook.

The impact on the asset classes equities and bonds

April was characterized by a downturn in stock markets across most regions, accompanied by a decline in bond prices, which were adversely affected by the increasing yields.

Equities

The S&P 500 saw a decline of 4.16%, a stark contrast to the previous month’s gain of 3.10% and markedly below the performance from the same month last year at 1.46%. This downward trend was echoed in the Eurozone and Switzerland, with reductions of 2.9% and 4.7% respectively. Conversely, the UK displayed a positive growth of 1.9%.

Bonds

In April, global government bonds experienced a decline of 1.5% in USD hedged terms. This movement in the bond market is a reflection of the ongoing adjustments in monetary policies and economic forecasts, which have influenced investor sentiment and driven interest towards traditionally safer asset classes.

What are the implications for the Everon portfolios?

The slight declines in the equity and bond markets also had an impact on the Everon portfolios. Compared to the international benchmarks, however, the various strategy lines held up well and recorded moderate corrections of minus 1.5-3.5%. We are continuing to maintain the broad diversification we have built up over the past few months.

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Political events

March saw a rise in commodity prices, with oil approaching a 5% rise to $87 per barrel for Brent crude. This surge was partly driven by continued Houthi attacks on shipping in the Red Sea, prompting oil tankers to navigate the longer route around Africa. Such detours not only maintained high levels of oil in transit but also contributed to a tighter Atlantic Basin market, pushing crude oil’s forward pricing structure into deeper backwardation.

On the monetary policy front, central banks hinted at potential rate cuts, with the Swiss National Bank leading by reducing interest rates by 25 basis points to 1.50%, marking a shift among developed-market central banks towards easing monetary policies. Similarly, the Bank of Japan made a pivotal move by ending its eight-year practice of negative interest rates, responding to clear signs of robust wage growth within the country.

The situation on the markets

The US economy demonstrated resilience, with notable improvements in retail sales and industrial production. Early estimates for the first-quarter GDP showed growth exceeding usual rates, although inflation presented a mixed picture – slight increases in overall levels were observed, yet the core inflation, which excludes volatile food and energy prices, continued on a downward trajectory.

Europe’s economic performance was more restrained, marked by mixed signals from manufacturing and service sectors. Conversely, the UK showed more positive economic indicators, evidenced by slight GDP growth and a consistently strong Composite PMI during the first quarter.

The forecast for global consumer price inflation in 2024 was modestly adjusted upwards, still indicating a decline from the previous year’s levels. This adjustment reflects a gradual and uneven process of disinflation, suggesting that while inflation pressures are easing, the pace and extent of this decline vary across regions and sectors.

The impact on the asset classes equities and bonds

March witnessed a continuation of the positive trend in global equities, with a notable 3.1% increase in USD terms. This consistent upward movement highlights the widespread optimism among investors, spanning various sectors and geographical regions. Meanwhile, government bonds saw a rise as well, albeit at a more modest rate of 0.7% in USD hedged terms, reflecting an overall confidence in the market.

Equities

Major global stock indexes experienced upward trends, showcasing widespread investor enthusiasm and engagement across markets. The MSCI All Country World Index, a comprehensive gauge of global equity performance, rose by 3.1%, indicating a persistent upward trend across different regions. In the US, stocks also enjoyed a 3.1% increase, while European markets, particularly the Eurozone and the UK, outperformed with rises of 4.2% and 4.5% respectively. This pattern underscores the positive sentiment permeating through global equity markets, driven by various sectors and geographical areas.

Bonds

The bond market demonstrated mixed results, with distinct factors influencing the outcomes for government and corporate bonds. Government bonds, in particular, experienced a positive shift, registering a 0.7% gain in USD hedged terms, indicating an overall increase in their performance. This upward movement in government bonds was coupled with a decrease in longer-term government bond yields over the month, reflecting a complex interplay of factors including central bank policy expectations, inflation trends, and economic outlooks.

What are the implications for the Everon portfolios?

The upward trend in equities also ensured a consistently positive performance in the Everon portfolios of all strategy styles in March – these gained between 2 and 5% depending on the regional focus and strategy style. We responded to the trend in bonds with a slight reduction in the strategic asset allocation in favour of real estate.

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Political events

In February, the geopolitical landscape saw heightened tensions with Syrian conflict spillovers involving Israeli and U.S. military actions, alongside operations against Houthi forces in Yemen amid Red Sea tensions. Concurrently, the European Union took a significant step by greenlighting a substantial €50 billion aid package for Ukraine, facilitated by Hungary retracting its previously imposed veto.

The situation on the markets

The US saw a softening in key economic indicators, with dips in retail sales and industrial production at the beginning of the year. Yet, early Q1 GDP estimates showed robust growth. Manufacturing activity cooled in February, while the labor market remained tight, maintaining a 3.7% unemployment rate. In contrast, the UK entered a technical recession at the end of last year but showed signs of recovery with a January surge in core retail sales. The Composite PMIs for the Eurozone moved higher with a decline of headline and core inflation to 2.6% and 3.1% respectively.

The impact on the asset classes equities and bonds

Despite concerns in specific sectors, the overall market mood remained positive, with global stock markets achieving their fourth consecutive monthly gain. Conversely, the bond market faced challenges as treasury yields rose, reflecting investor adjustments to Federal Reserve rate cut expectations. These dynamics underscore a period of optimism in equities fueled by strong earnings and economic data, alongside a recalibration in the bond market due to shifting monetary policy outlooks.

Equities

Global equity markets marked a fourth consecutive month of gains with the tech-heavy S&P 500 surpassing the 5000-mark with a 5.2% increase. This surge was led by significant growth in major tech companies, collectively referred to as the “Magnificent 7,” which saw their best performance in nine months with a 12.1% gain. Emerging market stocks also performed well, with a 4.6% increase, almost fully recovering from earlier losses, driven by a strong rebound in China.

Bonds

In contrast, the bond market faced declines due to rising treasury yields, influenced by strong US economic and inflation data and Federal Reserve officials emphasizing no rush for rate cuts. This led investors to adjust their expectations, anticipating the Fed’s first rate cut in June and forecasting fewer rate reductions in 2024 than initially expected. This shift resulted in a significant increase in bond yields, with the 10-year climbing 34 basis points to 4.25%, while the two-year treasury rose by 41 basis points to 4.62%.

What are the implications for the Everon portfolios?

The rising equity markets led to a positive performance throughout the Everon portfolios, with our flagship strategy – the Everon Multifactor 100 – standing out with a return of over 6%. We largely maintained our asset allocation in February, with an evenly high level of diversification among the individual instruments. The other strategy lines in the areas of sustainability and income as well as our passive approach (Smart Global Markets) also performed well with returns of 4 to 5% (with 100% equities) and outperformed the benchmarks.

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Political events

Taiwan’s elections and the conflicts in Ukraine and the Middle East were central political events influencing market sentiments. The outcomes of Taiwan’s elections, with the Taiwan People’s Party (TPP) capturing a significant portion of the legislative seats, have set the stage for potential shifts in domestic and international policies. Concurrently, the ongoing conflicts in Ukraine and the Middle East, marked by military engagements and geopolitical tensions, continued to test the resilience of global markets and international relations.

The situation on the markets

The global economy showed signs of moderating inflation and steady growth, paving the way for a potential soft landing. According to the World Economic Outlook Update by the IMF, global growth was projected at 3.1% for 2024, a slight increase from previous forecasts, buoyed by resilience in the United States and several large emerging markets, alongside fiscal support in China. However, this growth rate remains below the historical average, with high central bank policy rates, fiscal support withdrawal, and low productivity growth as constraining factors. Notably, global headline inflation was expected to decline, with a forecast of 5.8% in 2024, indicating an easing of inflationary pressures.

The impact on the asset classes equities and bonds

The financial markets, particularly equities and bonds, responded to the evolving economic landscape shaped by political events, fiscal policies, and global economic conditions. The interplay of these factors resulted in distinct trends and performances in both asset classes.

Equities

The equity markets in January reflected a cautious optimism among investors. The performance of mega-cap stocks was a focal point of discussion, highlighting their significant influence on overall market trends. These companies, having demonstrated resilience and profitability, continued to attract investor interest, despite concerns over valuation levels​​. The Dow Jones Industrial Average rose 1.3%, while the S&P 500 and the NASDAQ added 1.7% and 1% respectively. The equities market’s positive trajectory was supported by a stable interest rate environment and a moderating inflation outlook, which bolstered investor confidence in risk assets​​.

Bonds

The beginning of the year saw a steady performance in Treasury yields, with minor increases observed in longer-term Treasury bonds. Specifically, the 30-year Treasury bond increased by 19 basis points to reach 4.22%. In contrast, the shorter-term Treasury Bills, including the 1-month, 6-month, and 1-year durations, saw decreases by a few basis points.

What are the implications for the Everon portfolios?

The fundamentally positive developments were also reflected in the Everon portfolios in January. Our global strategies (multifactor, income and sustainability) all posted gains of between 2% and 3% in the equity segment. It is worth mentioning that the Swiss franc weakened somewhat, particularly against the US dollar, which meant that performance in the global portfolios also benefited from foreign currency effects. In the multifactor and income strategies, we are maintaining the relatively high degree of diversification of individual securities that we have built up over the past year at the beginning of this year.

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Political events

The situation in the Middle East significantly impacted global markets. The ongoing violence tested international relations and agreements, while also affecting various sectors like energy, consumer goods, and telecommunications. Companies faced challenges such as supply chain disruptions and increased shipping costs. The conflict also threatened natural gas production in the Mediterranean, raising concerns for Europe’s energy supply. This situation, coupled with currency volatility, led to potential rises in global oil prices, affecting consumer demand and overall market conditions.

The situation on the markets

The Federal Reserve held the federal funds rate steady at 5.25%-5.50%, marking its third consecutive hold and indicating a possible shift from rate hikes to future cuts. The market positively received this change, along with signs of softening inflation and a cooling labor market. Core PCE, the Fed’s preferred inflation measure, continued to decrease, nearing the 2% long-term target. The labor market remained strong, but there were indications of slowing down, reinforcing the belief that peak interest rates may have been reached.

The impact on the asset classes equities and bonds

The financial markets experienced notable shifts, particularly in the asset classes of equities and bonds. These changes were influenced by the Federal Reserve’s interest rate decisions, evolving economic indicators, and market sentiments.

Equities

In the equities market, the trend was largely positive. The decision by the Federal Reserve to hold the federal funds rate steady played a crucial role in this upswing.  The S&P 500 rose by 4.5%, while U.S. small-cap stocks, which had previously lagged, made a notable comeback with a 12% return in December. Large-cap stocks also saw healthy gains, with sectors like consumer discretionary, real estate, and industrials leading in returns. The overall market performance was boosted by lower expected future interest rates and positive end-of-year seasonality.

Globally, European and Asian markets also responded positively, with the Stoxx Europe 600 and the Asia-Pacific MSCI index both showing modest gains, reflecting a global relief.

Bonds

The bond market witnessed its best performance in decades, a development welcomed by investors with balanced, moderate, or conservative portfolios. The decline in U.S. Treasury yields, with the 10-year yield dropping below 4%, was a key factor driving this rally. The yield curve, reflecting these lower yields, indicated a significant market shift in anticipation of future interest rate trends. This decrease in yields was particularly pronounced in the longer-duration fixed income yields, which are more sensitive to future interest rate expectations and changes in Federal Reserve policies.

Globally, bond markets in Europe and Asia mirrored this trend, with government bonds in Germany and Japan experiencing similar declines in yields, suggesting a synchronized global bond market response to U.S. monetary policy and global economic outlook.

What are the implications for the Everon portfolios?

As we closed out 2023 under positive market conditions, in December we maintained a broad diversification in all our strategies by including a high number of individual instruments and keeping a constant asset allocation. This allowed us to achieve a positive performance across the board, from the global to the Switzerland and sustainability focused strategies.

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In this Market Update, we look back at the global financial markets in November, provide an outlook for the months ahead and explain how we adjusted our portfolios in the last rebalancing.

Economic situation

Despite the current high interest rates, the US economy remains robust, with recent quarterly GDP results more indicative of an economic boom than a recession. The unemployment rate in the USA has reached its lowest level in 50 years. Coupled with positive real wage growth amidst high inflation, the strong labor market acts as a buffer, helping the economy withstand higher interest rates for now.

The situation on the markets

In November, the dynamic relationship between bond yields and stock prices remained a key focus. The stock market is currently showing significant sensitivity to fluctuations in returns. Over the past few months, yields on ten-year US government bonds have fluctuated between 4 and 5 percent. At these levels, any further uptick in yields tends to prompt negative responses in equity returns. This is primarily because rising bond yields can adversely affect equity valuations, leading to increased capital costs, reduced margins, and lower future cash flows. However, the trend shifted in November, with declining bond yields contributing to notable increases in stock prices.

The impact on the asset classes equities and bonds

Equities

Following a three-month correction in equity prices, a combination of high risk aversion, negative investor sentiment, and substantial cash holdings among global fund managers set the stage for a rebound in November.

The stock market experienced a significant rally, with the S&P 500 advancing by 9.1%, the Dow Jones Industrial Average climbing 9.2%, and the NASDAQ surging 10.8%. This rally was sparked by unexpectedly low US inflation data, prompting global indices to also post gains of 8% and above.

Additionally, volatility levels in the USA, Europe, and Switzerland have dropped to their lowest since the onset of the coronavirus crisis.

Bonds

Treasury yields saw a notable decline in November as investors shifted back to equities. Yields on both the 5-year and 10-year treasuries fell by 51 basis points, marking the most significant drop across the yield curve.

The surprisingly robust economic development in the USA is perceived as a key driver for the rising yields on longer-term bonds.

What are the implications for the Everon portfolios?

November stood out as the best month of the year for equities. Our adjustments in previous months, particularly towards broader diversification in the Multifactor strategies with an increased number of individual stocks, paid off. Coupled with the positive trends in the equity markets, these adjustments enabled us to achieve positive performances ranging from 5 to 9% in November in all strategies within the equity sector. We continue to maintain a broad diversification and a large number of individual stocks.

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In this Market Update, we look back at the global financial markets in October, provide an outlook for the months ahead and explain how we adjusted our portfolios in the last rebalancing.

Political events

Global political events in October were dominated by the reignited conflict in the Middle East. Should this conflict continue to escalate, further macroeconomic impacts can be expected. For instance, global inflation, economic activity, and potentially higher oil prices, as the conflict may spread to other regions. The Middle East is responsible for around a quarter of the global oil supply. As an initial impact, oil and gold prices have already seen a short-term rise.

The conflict has introduced a new factor into the already challenging macroeconomic context, which has been characterized by rising interest rates, tight monetary policy, and a US that was only partially able to respond.  The widely-watched Volatility Index (VIX) also experienced a sharp short-term increase.

Global equities fell by 3% in October, partly due to valuation adjustments resulting from higher interest rates.

The situation on the markets

On one hand, investors are currently risk-averse, as evidenced by many global investors holding above-average amounts of liquidity and the high demand for hedging instruments. On the other hand, a shift away from this risk-averse attitude, coupled with the available liquidity, could also drive-up prices. There is also a prevailing assumption that US interest rates have peaked, or will soon peak, which could at least alleviate the pressure of interest rates on equities. Despite the complexity of the current environment, positive countertrends can emerge at any time. Notably, a robust strategic allocation has proven to be extremely important in such challenging periods.

The impact on the asset classes equities and bonds

Current developments in the financial markets are influenced by an above-average number of strong factors. In addition to the conflict in the Middle East, interest rate policies and the trajectory of economic growth continue to dominate market activities. Regarding interest rate policy, a turning point is becoming apparent — that is, a foreseeable end to interest rate hikes. Both the European Central Bank and the US Federal Reserve refrained from further increases in October, though future hikes have not been ruled out.

Equities

Against this backdrop, equities also declined in October (by approximately 3% worldwide), experiencing some pressure in comparison to bonds, which are benefiting from higher yields. However, the Swiss equity markets performed relatively well in an international comparison.

Bonds

There is a strong negative correlation between bond yields and equity market performance. As a result, bonds have become more attractive again. For instance, the interest rate on ten-year US government bonds has exceeded 5% for the first time in 16 years. “Safe haven” assets, such as gold, have also seen benefits. This underscores once again the importance of a broad-based asset allocation for risk diversification.

What are the implications for the Everon portfolios?

We regularly review our portfolios to ensure a constant asset allocation, which is demonstrably the most important factor for long-term performance. The current period is undoubtedly marked by above-average uncertainty. One way to mitigate this volatility is to focus on stable companies with solid fundamentals and high dividend payouts. Typically, large-cap stocks perform better in such situations. This approach is embodied in our Income strategy, which concentrates on solid, high-dividend, and high-payout stocks and has managed to offset the generally disappointing market performance well. We also offer customized solutions, such as capital protection products, that significantly reduce uncertainties.