September General Market Comments

“Supernature” – Cerrone, 1977

The S&P 500 broke to new highs in September and is up 20.8% year to date. It has delivered a 16.2% annualized total return over the last 5 years, 13.5% over the last 10 years and 14.3% over the last 15 years. It is a “Supernature”, to paraphrase Marc Cerrone in his 1977 disco smash. In fact, the “Supernature” are more to be found in the constituents of the index: its top 6 market caps (Apple, Microsoft, Alphabet, Meta, Amazon and Nvidia) are only 34 years old and weigh as much as $ 2.5 trillion, on average. “And they grew up in the way that we’d never seen before” to quote Cerrone again.

Thanks to a strong month (+2.0%, the best September return since 1997), the S&P does it again this year and, with a +20.8% return so far in 2024, outpaces all major equity indices. Beyond this performance, September has recorded many wild moves in financial markets; as the Fed eased, as expected, long term yields fell (-12 bps for the US and -18 bps for Germany), Gold soared again (+5.2%), the dollar weakened (-0.9% versus the euro and -2.1% versus the Yen), while Chinese equities skyrocketed following the announcement by Chinese authorities of a massive stimulus plan (the CSI300 rose 21.0%). This has propped up most commodities, but, very strangely, not Oil, which collapsed 7.3% and is now down 4.9% for the year. Who could have predicted that extremely serious tensions in the Middle-East, coupled with a monster stimulus plan tinkered by China, would have seen Oil fall by this magnitude?

September’s over and we now enter a statistically favourable period for equities. Will investors keep their loot snug in their arms, or maintain, or even increase, risk?

 

 

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS PARTNERS SA provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data or other financial instruments referred to in this general comment. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

August General Market Comments

“Good Times” – Chic, 1979

With all major equity indices  comfortably up so far this year (barring the Chinese CSI300), investors are clearly enjoying good times; added to the pleasant returns delivered by stocks, fixed income and credit also rose in August, helped by the looming rate cuts that the Fed has telegraphed at the beginning of July. The flip side of this optimism is that there are more and more signs of an economic slowdown in the US, which has left investors unscathed at this point because the preferred scenario is a soft landing, not a recession.

In August, the MSCI World added 2.5%, the S&P500 2.3%, the tech-heavy Nasdaq 1.1%, the Stoxx 600 1.3% and the MSCI Emerging Markets 1.4%; the Japanese Topix confirmed its dependency on the JPY exchange rate: while the Yen rose 2.92% versus the US dollar, the Topix fell by the exact same percentage. It is interesting to notice that, in a month of falling yields (usually favouring Growth), the MSCI World Value outperformed the MSCI World Growth (+2.6% vs +2.4%), which is quite an unusual feat. Much more conform to the tradition was the upside move in Gold (+2.3%) when both the dollar and yields fall (-2.3% for the broad dollar index and -13 bps for the US 10 year yields). August marked the end of the Q2 earnings season, which has been good overall; expectations were pretty high though, as shown by the market’s reaction to the spectacular results published by Nvidia: despite a blow-up, the stock fell more than 6% the very day of the earnings release.

So, should you “leave your cares behind” or consider “that it’s getting late”, as sung by Chic? There are pros and cons: softer economic growth is not good for profits, but, at the same time, lower interest rates should help the economy and valuations. Inflation has receded and does not seem to be a threat for now, so the path gets clearer for Central Banks to ease.

 

 

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS PARTNERS SA provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data or other financial instruments referred to in this general comment. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

July General Market Comments

“May be a price to pay” – The Alan Parsons Project

Volatility is most investors’ foe, but it may be a price to pay at some moments. Unless you’re a very talented trader, you tend to be a victim of wild moves in financial markets, as they trigger high hopes or deep despair and push you to forget fundamentals. As the old say goes, “I know bold traders, I know old traders, but I don’t know old bold traders”. When markets reach certain extremes, combined with important decisions to be made in terms of monetary policies and heightened geopolitical tensions, volatility can be expected. July 2024 has been this type of moment. In order to highlight how volatile July has been, Nvidia, the world’s largest company in terms of market cap and the poster child of the AI craze, has seen its share price vary from a $ 135 high to a $ 103 low, just for the month of July, which means that, without any news about the company’s results to be published in August, its valuation has fluctuated by $ 750 billion, more than 6 times its estimated revenues for the year!

Nevertheless, despite increasing signs of nervousness among investors, equity markets have mostly been positive in July, with the MSCI World up 1.7%, the S&P 500 up 1.13% and the Stoxx 600 up 1.32%. The Japanese Topix, the MSCI Emerging Markets and the Chinese CSI300 receded somewhat, but not alarmingly (between -0.14% and -0.57%). With inflation figures pointing to moderation in the US, yields have tumbled (-37 bps for the US 10 year and -20 bps for the German Bund), propelling Gold to the upside (+5.19%) and the US dollar down (-0.9% versus the euro and -6.41% versus the JPY, the latter having also been buoyed by the BoJ’s wake-up call). If developed markets equities felt the relief of lower interest rates, this was also the case for Credit, as the Itraxx Crossover rose 1.86%. As markets like to surprise investors, this lower yields environment did not favor Growth versus Value stocks: the MSCI World Growth lost 0.97% while the MSCI World Value gained 4.66%.

August 2024 will see the end of Q2 publications and more colour about future monetary policy trends, at a time when valuations are still demanding; volatility should remain steady, and this may be the price to pay for a while.

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS PARTNERS SA provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data or other financial instruments referred to in this general comment. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group