June General Market Comments

“In the Summertime” – Mungo Jerry, 1970

Yes, it’s now summertime; a season supposed to be quieter for financial markets. But history suggests that it’s not necessarily the case and that, for whatever reasons, there can be significant spikes of volatility during the summer months. In Mungo Jerry’s song, it’s all about easy and pleasant choices to be made in summertime, while, for investors, choices can be tricky, especially after the very particular first half we’ve been through and the multiple possible troublemakers ahead, like US elections and the Democrat candidate debate, French elections, continuous geopolitical tensions, Central Banks policies, the Yen’s incredible weakness (is it hiding something serious?), and, of course, demanding valuations in equity markets which are more polarized than ever, with the spectacular dominance from AI-related plays and Growth versus the rest of the market, not to mention very tight credit spreads which are at relatively dangerous levels if we look at the past occurrences when it reached these lows.

June 2024 has been kind of a redux of the last 18 months for equities: the MSCI World Growth added 4.8% while the MSCI World Value lost more than 1%, this says it all. The dynamics around AI and especially Nvidia buoyed the Nasdaq again (+6.2%), and the S&P 500 benefited as well with a +3.5% return. European markets have been weak, with the French elections possibly jeopardizing an historical centre (left or right) oriented National Assembly: the Stoxx 600 lost 1.3% and the euro fell 1.24% versus the dollar. Sovereign spreads also tended to widen on the Old Continent. The Japanese Topix added 1.3%, the MSCI Emerging Markets 3.6% and the Chinese CSI lost 3.3%. When measured into USD, many markets struggle versus the S&P 500 year to date: Europe is 11% behind, Japan 10%, China 16% and EM 8%.

Long term Government yields receded somewhat with better inflation gauges, Credit was down, and Gold stayed flat while Oil added 5.9%, outstripping the shiny stuff for the year (+13.8% versus +12.8%).

 

 

 

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

May General Market Comments

“All eyez on me” – 2Pac, 1996

All eyes on who or what? Central Banks, geopolitics, US or European elections? No, all eyes on Nvidia, at least when it comes to equity markets.

Just to highlight how flabbergasting Nvidia’s impact has been this year (not even to mention 2023), the stock is up 121% year to date at the end of May, contributing to no less than 27% of the MSCI World’s performance for 2024 (just as a reminder, this index comprises 1’450 stocks). Even more eye-popping, if we focus on the US market, Nvidia alone has accounted for around 45% of the S&P 500’s 6% year-over-year earnings growth, excluding NVDA, the S&P’s earnings growth would fall to only 3.3%.

Such an outstanding performance from the – so far – big winner of the AI investing theme has allowed a vast array of Information Technology and Communication Services stocks to grind higher also, which drove us back to where we’ve been for the last 18 months or so, in other words an uber dominance from Growth versus Value. As the MSCI World has added 4.23% in May, its Growth component has soared 5.6% while Value “only” rose 2.8%. US equities logically led the march, with the S&P500 up 4.8% and the Nasdaq 100 up 6.3%. European equities fared correctly with the Stoxx 600 up 2.6%, while Emerging Markets struggled to add 0.3% and are only up 2.5% year to date, versus +10.6% for the S&P500. The lack of IT and Communication Services behemoths is being felt everywhere outside the US.

All eyes on Nvidia, yes, but some developments are worth mentioning elsewhere: with softer economic data, hopes that Central Banks will soon ease resurfaced, the US dollar fell 1.6% versus the euro and US 10 year yields receded by 18 bps. Gold benefited and added 1.8%, and a more pedestrian economic growth pushed Oil down 6%. Looming rate cuts favoured credit, with the Itraxx Crossover up 1.6%, and the Yen finally resisted somewhat and regained a modest 0.1% versus the USD.

That’s it for this month’s Market Comments, stay tuned, markets never skip a beat.

 

 

 

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

April General Market Comments

“Superstition” – Stevie Wonder, 1971

Everybody knows the old market quip “Sell in May and go away”, which sounds like a superstitious motto, but, depending on which side of the pond you’re based, the timing for coming back differs significantly. In the US, that’s Labor Day (beginning of September), and on the other side of the Ocean, that’s Derby Day (Epsom horses races in the UK, beginning of June). This adage is simply based on historical observations: there is statistical evidence that equity markets returns are, on average, much better between November and April than between May and October. But the rationale behind this performance gap remains nebulous: the most common belief is that volumes tend to dry up as the sun becomes more present, investors swapping their prescription glasses for sunglasses and being more focus on sunscreen than desktop screens. That doesn’t sound very serious, but there is no other real explanation. “You believe in things you don’t understand”, as Stevie sings.

Well, in 2024, the selling season has started earlier, as April was pretty poor; is this an effect of Climate Change? Probably not: there is more and more evidence that inflation targets will prove challenging to reach, especially in the US, which questions the previously expected rate cuts by the Fed this year, some participants even suggesting a possible hike, something that was clearly not in the cards. As a result, long term yields shot up (+48 bps for the US 10 year, +28 bps for the 10 year Bund), the dollar rose with +1.66% for the broad DXY index, and most equity markets fell: the MSCI World abandoned 3.9%, the S&P 4.2%, the Nasdaq 4.5% and the Stoxx 600 1.5%. Some surprises to mention though: despite a strong dollar and rising yields, Gold shone and added 2.5%, Emerging Markets equities resisted and ended the month up 0.3%, and the Chinese CSI 300 index surged 1.9%.

Value and Growth were both weak (-3.6% for the MSCI World Value and -4.1% for the MSCI World Growth), but the Japanese Yen takes the cake for weakness with a 4% fall versus the dollar (-11.6% ytd), mitigating the apparent strong Topix performance: in USD terms, the Japanese equity index lags the S&P 500 by almost 150 bps year to date.

That’s it for this month’s Market Comments, stay tuned, markets never skip a beat.

 

 

 

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

February General Market Comments

“Free Bird” – Lynyrd Skynyrd

Out of its cage, a bird is free to fly high, with no limits in sight; we’ve witnessed many market birds enjoying this experience in February 2024, with no less than 9 major equity indices breaking through their all-time highs: the S&P 500, the Dow Jones, the Nasdaq 100, the DAX, the CAC, the Swedish OMX, the Dutch AEX, the Japanese Topix, and, as a symbol, its Nikkei sibling, which finally bettered its 1989 mark.

As a consequence, the MSCI World also reached an all-time high.

The unabated optimism around AI continues to drive equity markets to the upside, thanks to the very convincing results and forecasts delivered by the thematic’s behemoths like Nvidia, Meta, Microsoft and Amazon; it is although worth pointing out that, at least up to now this year, the Magnificent 7 have lost three comrades-in-arms (Apple, Alphabet and Tesla are in negative territory) and have morphed into the “Fabulous 4”.

The earnings season being almost done, we can draw some conclusions out of it: results have mostly been very good, and very few companies showed serious concerns about the business in 2024. Although positive, the tone was nevertheless not exhilarating, apart for the majority of those companies very much involved in AI.

The steady performance of equities is even more eye-popping when looking at interest rates moves this year: 10 year yields have gone up significantly (almost 40 bps for the US and Germany), as rate cuts expectations get further delayed due to the strong economy and resistant inflation, especially in the US. This has translated into a steady USD (respectively up 2.2%, 6.4% and 1.2% versus the EUR, the JPY and the CNY) and sustained oil prices (+9.2% so far this year). Growth stomps on Value, again, and due to the incredible rise of the big Growth names, it is striking to see that the S&P 500 has performed roughly in line with the Nasdaq 100, whereas the MSCI World Growth outpaces the MSCI World Value by 370 bps year to date. But let’s not spoil the party and enjoy these good markets; “Won’t you fly, high, Free Bird, Yeah!” as the legendary Lynyrd Skynyrd song says.

That’s it for this month’s Market Comments, stay tuned, markets never skip a beat.

 

 

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

January General Market Comments

“Knock on Wood” – Eddie Floyd, 1966.

This time it’s for real: many major indices have broken to the upside, touched all-time highs, or reached levels unseen for years during the month of January: the S&P 500, the Dow Jones, the Nasdaq 100 (but curiously not the Composite), the DAX and the CAC, among others, hit their historical highs, while the Topix has now its 1990 record in sight (still 13% to go, though) and the FTSEMIB is as high as it was in 2008, before the GFC. This rosy picture nevertheless gets a tad sober because of the Chinese CSI300, which, contrarily to the aforementioned indices, broke to the downside and is now 46% lower than its 2021 record. The Chinese rout dragged the broad MSCI Emerging Markets down 4.2%, just for January. Despite mixed returns recorded by the Magnificent Seven, Growth embarked 2024 the way it sailed during 2023, strongly and outpacing Value by 2.3%.

For once, fixed-income markets were relatively calm, with the US and the German 10 year yields barely up, but currencies and commodities had quite a volatile start of the year: the dollar rose 1.7% versus the euro, 3.8% versus the Yen and 1% versus the Renminbi, while Oil added 5.9% (buoyed by renewed tensions in the Red Sea as well as a possibly stronger global GDP growth, as confirmed by the IMF) and Gold receded by 1.1%.

“So goes January, so goes the year” says an old Wall Street quip; let’s then “Knock on Wood”, to paraphrase Eddie Floyd, and hope this proves true in 2024, with new highs in sight!

That’s it for this month’s Market Comments, stay tuned, markets never skip a beat.

 

 

 

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