August general market comments

“(Everybody Wanna Get Rich) Rite Away” – Dr John, 1974.

As August 2025 draws to a close, the financial markets are dancing to the frenetic beat of Dr. John’s “(Everybody Wanna Get Rich) Rite Away,” a funky anthem that captures the universal itch for quick wealth. This month, that rhythm pulsed through global equities, with the Shanghai Composite Index surging nearly 20% from its early August low, adding almost a trillion dollars in market value despite China’s economic headwinds, tariffs, a property slump and persistent deflation.

The S&P 500, meanwhile, pushed past 6,400, riding a 60%+ rally since October 2022, fueled by AI hype and Fed rate cut optimism. It’s a bull market on steroids, but the lyrics’ warning – “If you wanna be rich and you wanna be wealthy, I believe I’d rather be poor and healthy”- echo a growing unease. The rush to riches is evident in China’s 2.1 trillion yuan in margin debt, nearing the 2015 bubble peak and US tech stocks’ outsized gains, reminiscent of the dot-com frenzy. Volatility spiked early in the month, with the VIX jumping to 30 on August 5, reflecting investor jitters beneath the rally’s surface.

Central banks and policymakers tout stimulus and soft landings, but the relative disconnect from fundamentals, flat consumer prices in China, slowing US earnings growth -suggests a speculative bubble inflating alongside this bull run. Dr. John’s swampy groove reminds us that chasing instant wealth can lead to a “racka tacka tacka rum-dum game,” where very few win if sentiment sours. Caution, not just celebration, is the order of the day as September looms.

In a month marked by the end of the Q2 earnings season, which was good but not upbeat, the MSCI World added 2.5%, the S&P 500 1.9% and the MSCI Europe 0.7%. Big advances were recorded in Japan (+4.5%) and China (+10.3%). With looming rate cuts from the Fed, the dollar lost 2.3% versus the euro, US 10 year yields hovered 15 bps lower, and Gold, Bitcoin and Oil soared 4.8%, 8.3% and 6.4% respectively. The renewed political uncertainties linked to France’s very poor budget and debt situation probably limited the euro’s rise, but no panic visible so far: year to date, French 10 year yield is up 33 bps, similar to Germany (+35 bps). Still, France borrows more expensively than Greece now, which was unthinkable some years ago.

Credit fared well, but spreads are ultra-low all across fixed-income credit instruments, leaving little room for further tightening.

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

Swiss industry: stability amid uncertainty

A driver of growth and a source of added value, Swiss industry deserves its place in investment portfolios.

Often seen as a service-driven economy, Switzerland in fact rests on a solid and diversified industrial base. Key sectors such as pharmaceuticals, chemicals, machinery, metalworking and electricity generation make up a robust export-oriented industrial ecosystem that plays a decisive role in the country’s wealth creation. In 2024, the secondary sector made up 24.7% of GDP, an unusually high figure for a developed economy, exceeding the European Union average.

A Remarkable Trajectory, Despite a Strong Franc
The Swiss franc, long considered a traditional safe-haven asset, has strengthened versus other major global currencies. In theory, this trend should undermine export competitiveness, yet it has not hindered the momentum of Swiss industry. In fact, over the past 15 years, Swiss industrial production has shown steady growth. In Q1 2025, it rose by +8.5% year-over-year. Even more striking, industrial output has grown by nearly 40% since 2010 despite the franc strengthening by over 25% relative to the euro. What explains such performance? Much of it lies in the structure of Swiss industry itself. The absence of a large automotive sector, combined with a focus on high value-added niches, gives Swiss industry greater resilience to external shocks and the ability to export specialized goods that continue to be in high demand globally.

Understanding the Swiss Industry Landscape

Switzerland Generates Far More Value Per Exported Unit than China
While China remains the world’s largest industrial producer by volume, Switzerland stands out through its much higher value-added intensity. In 2024, Switzerland’s per capita trade surplus was nearly 12 times higher than China’s. This momentum also sets Switzerland apart within Europe. Industrial growth here has been significantly more robust than in most major European economies, including Germany.

U.S. Trade Policy: Ongoing Uncertainty
In 2025, one of the key external risks remains the trade policy of the United States. Tariff measures announced by Donald Trump prompted many companies to bring forward deliveries into Q1, contributing to GDP growth for the period. In response to this uncertain climate, Swiss companies are adopting various adaptation strategies: price adjustments, partial reshoring of value chains, and geographic diversification, even as hopes persist for a bilateral agreement. Diplomatic pressure is mounting and drawing firm conclusions in such a fluid environment remains risky. However, Switzerland’s focus on differentiated products suggests the country will continue to adapt effectively.

A Strategic Long-Term Positioning
Despite international economic uncertainty, Swiss industry, driven by niche leaders, a culture of constant innovation and a highly skilled workforce makes a strong case for long-term strategic exposure in investment portfolios. Whether facing a strong franc or trade tensions with the U.S., Swiss firms are quick to adapt. Even in a context of global slowdown, Switzerland continues to maintain a healthy trade surplus. This reflects the structural resilience of its industrial model.

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 the 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 provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. 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

Quarterly Investment Review – Q2 2025

We’re running roughly a 7% fiscal gap and probably a 3% gap is what’s sustainable. The further you drift from that, the closer you get to the point where it becomes uncontrollable. It’s a job I don’t want, but it’s a job that needs to be done.

Warren Buffett on DOGE & the US deficit in his final Berkshire meeting

The US no longer represents a rock such as anchored the West for so many decades, but more like sand, shifting underfoot.

Max Hastings

Quarterly Investment Review – Q2 2025

The second quarter of 2025 started in dramatic fashion with the announcement by President Trump of his tariff proposals, described by him as Liberation Day. This precipitated the largest three-day decline in the S&P since the 1987 crash, leading to the temporary easing and suspension of the tariffs till July 8th while further negotiations take place. The quarter ended equally dramatically with the US engaging in the first official military action against Iran since 1979, when the Shah was deposed. The scale of the tariffs was shocking with countries facing double, treble or more of what they had expected, and the announcement was delivered with unusually undiplomatic aggression. At the end of May Elon Musk, who had led the cost cutting DOGE initiative, departed having fallen far short of the original targets set in the post-election euphoria. However, despite all these upheavals, by the end of the quarter most stock markets had advanced, and bond yields were barely changed. The only significant impact was on the dollar which fell by 10.7%, recording the worst first six months start to the year since 1973. Gold rose by 6%, and bitcoin by 30%. So, despite the chaotic political and military news flow financial markets enjoyed a good quarter.

The final level of US tariffs is still unknown, but on current indications the likelihood is that they will settle around 14-15%, a far higher amount than has prevailed for decades, but lower than threatened in early April. At one point Trump imposed a 145% rate on China. For comparison the effective tariff rate was 2.4% last year. It hasn’t been clear whether the primary purpose of these tariffs is to raise revenue or encourage industries to reshore, but their inflationary potential and the uncertainty that they cause for many industries has caused considerable alarm for businesses. Politically though they have worked for Trump. They exhibit a clear preference for labour over capital, making them popular in the swing states which secured his election victory last November, and given the electoral importance of these states these policies are likely to be durable. Yet with China Trump appears to have overplayed his hand. China depends on little from the US beyond semi-conductors, and even here the technological gap is closing, whereas the US imports hundreds of products from China, many of them of critical importance, hence the enormous trade deficit. Even the US defence industry depends on Chinese-processed rare earths to keep going. With so many American businesses dependent on Chinese supply chains the US was forced to back down from its initial position. By contrast, China is well prepared for this trade war having been adjusting to American aggression on trade policy since 2017. Given how intertwined the two economies have become after thirty years of integration, a face-saving resolution is in both sides interest.

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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 provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. 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

Chart of the month: US economic consensus 2025 less good than expected

US economic consensus 2025 less good than expected

Donald Trump’s November 2024 election victory sparked optimism for a revitalized US economy, with expectations of good GDP growth and a reduction in the hefty budget deficit inherited from the Biden administration. Equity markets soared after Election Day, signaling confidence in Trump’s economic agenda. The initial Bloomberg Consensus for 2025 projected GDP growth at 2.2%, with hopes of fiscal discipline to tackle the long-standing deficit challenge.

Yet, Trump’s tariff obsession, marked by “Tariffs Day” in April 2025, defied David Ricardo’s free trade principles, creating a lose-lose scenario. The updated 2025 consensus reveals a GDP growth drop to 1.4% and a core PCE inflation spike to 3.0%, reflecting expected short-term inflationary pressures. This tariff-driven approach has disrupted global trade, stifled growth, decreased corporate profits and raised consumer costs, undermining the early economic optimism.

The situation deteriorated further with the first draft of Trump’s “Big Beautiful Bill,” which unexpectedly widened the budget deficit disappointing investors who anticipated fiscal restraint. While tariff revenues may partially offset the deficit, the bill has hampered DOGE’s (Department of Government Efficiency) efforts to curb spending. Rising concerns over sustained borrowing have caught the attention of bond vigilantes, pushing US 30-year government bond yields to 5.0%.

The 2025 consensus now paints a less rosy picture: GDP growth at 1.4%, higher inflation (set to ease in 12-18 months), and a persistent -6.5% budget deficit. This has weakened the dollar, driven interest rates higher, left equity markets flat, and fueled uncertainty among consumers and corporations.

However, Trump has shown a willingness to pivot when needed, so we may see tariff reductions and a revised “Big Beautiful Bill” that better aligns with market expectations, potentially easing some of these economic strains.

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 provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. 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

March general market comments

“Say No Go” – De La Soul, 1989.

March 2025 was a wild ride for financial markets, a bit like De La Soul’s “Say No Go”: trying to reject bad vibes, even when it gets shaky. Caution prevailed at the beginning of the month, but investors were hoping for a smooth jam with deregulation and AI-driven growth to keep the party going; unfortunately, like De La Soul warns about dodging the wrong crowd, trade tensions flared up fast with a 25% tariff hit on Canada and Mexico and a 10% tariff hike on Chinese goods, which triggered retaliation from Canada (25% on US exports) and from China (15% on US agricultural products). Markets went in a “Say No Go” mode, with the S&P500 dipping into correction territory, while the Nasdaq and the dollar cratered.

The Fed maintained its rates steady, with Powell playing cool as he said that the economy was still “plugging in the sunshine”, mentioning solid labor conditions, but inflation refusing to significantly tame led Jerome to rebuff flipping the script.

The S&P500 lost 5.75% in March, the Nasdaq 7.69% and the Stoxx 600 Europe 4.18%. It wasn’t all doom though, as the Japanese Topix resisted somewhat (-0.87%), like China (-0.07%) while the MSCI Emerging Markets rose (+0.38%). In this context, the MSCI World Value outpaced – again – the MSCI World Growth, with a -1.56% return for the former and -7.59% for the latter.

On the fixed income side, Germany’s possibly more relaxed stance on budget deficit, added to looming better prospects for the Old Continent’s economy, pushed yields higher (+33 bps for the German or Italian 10 year yields) on this side of the pond, while they stayed unscathed in the US. After two convincing months, Credit took a hit (-1.3% for the Itraxx Crossover), weakened by a steepening yield curve and increased recession risks in the US. The dollar tumbled 4.21% versus the euro and almost all commodities rose (Oil added 2.47%); Gold is the shining star of the year, hitting record highs above “The Magic Number” $ 3’000 per ounce (+9.3% in March), showing that investors are “Keepin’ the Faith”, even if at these levels “Stakes Is High”. So far it’s “All Good”, but “Watch Out”!

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