Time to perform differently – Global Macro

Time to perform differently: Global macro

Markets are shifting, and fast. Since late 2024, volatility’s up and equities are struggling. But global macro strategies? They’re thriving. Same returns, less risk. Half the volatility, negative correlation, and real resilience. At Haussmann, we now allocate over 25% to macro. Why? Because when markets get unstable, macro performs. It’s time to think differently and perform differently.

Cédric Dingens, Head of Alternative Investments

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: Time to perform differently – Global Macro

Time to perform differently: Global macro

In our previous “Chart of the Month” from September 2024, titled “Time to Reassess Market Risks,” we noted early signs of fragility in global market structures. Since then, markets have trended lower and become more volatile, driven primarily by Trump’s trade war and persistent geopolitical tensions.

By late 2024, one of our strongest convictions was the growing attractiveness of global macro strategies. These managers generate returns by identifying broad economic and political trends, such as shifts in interest rates, inflation, currency dynamics or global risk factors, and positioning portfolios accordingly across a diverse set of asset classes, including equities, bonds, currencies and commodities.

The accompanying chart highlights the performance and volatility of our global macro managers in Haussmann versus the MSCI World Index since 2020. While the equity market returned an impressive +55% over that period, our macro managers delivered comparable performance, with far greater resilience.

Crucially, the rolling volatility of the global macro strategy was roughly half that of equity markets and significantly more stable. Whereas market volatility peaked near 30%, macro volatility rarely exceeded 10%. From a portfolio construction standpoint, this is compelling: the strategy’s correlation to equities was only 0.18 and its downside capture was -7%, meaning it generally performed positively during equity market drawdowns.

Today, global macro represents more than 25% of Haussmann’s capital allocation. We take confidence in the long-standing strength of our top three macro allocations: Caxton, Castle Hook and Gemsstock which have been part of our portfolio for many years.

We are now operating in a market environment that is increasingly macro-driven. Trade tensions and tariff-related uncertainty continue to suppress risk appetite and heighten volatility. While we are not advocating an exit from equities, positive surprises remain possible, we strongly believe this is the time to complement portfolios with strategies that offer greater resilience and positive convexity.

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

January general market comments

“Ballroom Blitz” – The Sweet, 1974

China’s announcement of its LLM tool DeepSeek has been felt like a massive blitz in the global AI ballroom in January 2025. Supposedly way cheaper and less resources consuming (semiconductors and power) than its US equivalents, the DeepSeek bombshell triggered a vast series of questioning about the – so far – winners in the AI space, from chips manufacturers to industrial companies offering data centers cooling and utilities, among others. This, added to the looming tariffs from the US administration towards many of its trading partners, has generated a lot of volatility in global markets, which have nevertheless shown surprising resilience in such a context. Earnings releases have probably helped equities in this environment: in most instances they were good, even if, in some cases, outlooks were less buoyant than expectations (but still showing solid growth in general). Perhaps the continued strength in Gold (+6.6% in USD) and Bitcoin (+9.0% in USD), unbeknownst almost all major currencies, should be an indication that there are some signs of nervousness among the investment community.

The MSCI World rose 3.5% in January, nicely helped, for once, by Europe (+6.3% for the Stoxx 600) which has outpaced the S&P 500 (+2.7%). Despite DeepSeek’s smash, the Chinese market was weak with a 3% fall for the CSI300, and more generally Value outperformed Growth (+4.4% versus +2.6%), the latter having painfully felt Nvidia’s 10.6% retreat. It is noticeable that among European markets, the defensive Swiss equity benchmark SMI was the star of the month with a 8.6% return, reversing part of 2024’s underperformance.On the fixed-income side, yields stayed mostly put, while Credit started the year with a nice show, as highlighted by the 1.25% increase for the Itraxx Crossover. Oil rose 1.1%, and the dollar lost some modest ground versus the Euro, the Yen and the Renminbi.

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

December general market comments

Dance across the floor – Jimmy “Bo” Horne, 1978

When Jimmy “Bo” Horne wrote this song in 1978, the “floor” still prevailed on the New York Stock Exchange; this was the place where most of the equity transactions were done, with traders and brokers actively buying and selling stocks. A decisively good year for equities traditionally ended with a festive atmosphere on the pit. Electronic trading has gradually started to supplant physical trading in the 80s, and has now almost entirely replaced it. With 2024 marking a very rare back-to-back 20% + yearly return for the S&P500, we can imagine that traders and brokers would have danced across the floor on the 31^st of December, especially that, despite Covid, interest rates, inflation and geopolitics, the index has delivered a whopping 186% price performance since 2014.

Things could even have been better if December 2024 had not been a poor month for equities in general; the US economy is still defying the Cassandras, marking a sharp contrast with most regions. Fed’s ample easing expectations are being rattled down, with higher yields and a much stronger USD as a consequence. To wit, the US 10 year yield rose by 40 bps (+28 bps for the Bund), and the broad dollar index soared 2.6% (underneath the surface, the Euro was down 2.16%, but the Yen tanked 5.07%). WTI caught up 5.47% and ends the year flattish, Gold receded a tad (-0.7%, but still +27.2% for the year) and credit was barely down in an overall pretty positive year (+7.2% for the Itraxx Crossover in 2024).

When it comes to equities, very often does December confirm, and sometimes amplify, the general trends observed during the previous 11 month of any given year. 2024 was no exception, as, even if the market struggled contrarily to the rest of the year, style and sectors stubbornly maintained their trajectory. The nascent reversal triggered by Mr Trump’s win (the “Trump trade”) entirely faded and market polarization came back in force. Growth smashed Value with the Nasdaq up 0.4% versus -2.5% for the S&P500, but more striking is the performance gap between the MSCI World Growth and the MSCI World Value: +0.4% for the former and -5.8% for the latter in December, and +25.1% versus +9% in 2024, an incredible 1610 bps difference! Needless to say that winning Growth stocks, and among them the Magnificent-7 (or possibly the “Heavyw-8” with the addition of Broadcom), are in the US, which explains the vast outperformance from US equities versus all other markets so far.

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

October general market comments

“Atomic” – Blondie, 1979

No less than 3 of the largest companies in the world (all part of the famous Mag-7) have announced their will to go “atomic”, nuclear to be precise, to secure their ever-growing electricity needs in the future. Amazon, Alphabet and Microsoft made this bold move in the last few weeks, which marks a massive shift in the way nuclear energy is considered. This used to be the monopoly of Governments, directly or through their state-owned and/or regulated utilities, but the obvious enormous increase in electricity consumption related to data centres is pushing private companies to enter the power generation business. This, added to the space industry also being the subject of private initiatives, constitutes a serious change in domains that were, up to now, Government-led. What’s next is anybody’s guess, but there are chances that the very deep pockets of the Mag-7 and others will drive tectonic shifts in many industries.

The US presidential race has some atomic characteristics as well, but more in the way both candidates behave, while the Q3 earnings season, which has started in October, was more muted than atomic, at least for the big market leaders.

This has to be put in the context of rising long term yields (+50 and + 27 bps for the US and the German 10 year) and elevated valuations. There are no signs of an imminent severe slowdown for the US economy, and Europe’s and China’s difficult economic conditions aren’t new. While credit behaved extremely well despite rising yields (+0.45% for the Itraxx Crossover), equity markets were almost unanimously in the red: the MSCI World lost 2%, the S&P 500 1%, the Stoxx 600 3.4%, the MSCI Emerging Markets 4.4%, and the Chinese CSI300 3.2%. Japan was the sole outlier with a +1.9% return, but the Yen tumbled 6.3% versus the dollar. Oil zigged and zagged and ended the month up 1.6%, leaving again the spotlight to Gold, which added 4.1% and is up 33% year to date.

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

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

Chart of the Month – Time to reassess market risks

Time to reassess market risks

market risks The surge in stock market volatility in August serves as a reminder that markets may be more fragile and nervous than they appear on the surface.

During this period, the VIX index, which measures the implied volatility for the S&P 500 index spiked above the 65 level. This marked the third-highest peak in its history surpassed only by the collapse of Lehman Brothers in October 2008 and the COVID-19 pandemic outbreak in March 2020. However, the circumstances of early August were far less severe than those historic crises. So, what drove such extreme market behavior?

When we witness such dramatic volatility, it’s rarely attributable to a single factor. The initial catalyst in this case was a release of US employment data that significantly undershot expectations, reigniting fears of a deeper economic slowdown in the United States. This led to a sharp decline in equity markets and a corresponding rise in the VIX, though the movement at this stage was not yet alarming. Almost simultaneously, the Bank of Japan announced a 15bps rate hike, exceeding market expectations. Both news combined triggered one of the most intense carry trade unwinding in history.

As we can see on the chart, the Nikkei index literally plunged, and the Yen surged. The S&P 500 index also corrected significantly but the VIX index spiked far more in comparison to the spot price.

The market is far more nervous than at the beginning of the year. It is clear that developed market central banks – at the exception of Japan – will cut rates to face a sharper economic slowdown but the market’s depth has been reduced.

Key considerations moving forward include:

NVIDIA’s Growth Trajectory: NVIDIA’s exponential rise may continue to satisfy the gigantic CAPEX from the US Tech giants, but the probability of disappointing investors is also higher now.
India’s Valuations: India is seeing its promising growth confirmed, but it’s also reasonable to think that the valuation of a lot of Indian stocks has become excessive.
Geopolitical Risks: Geopolitical tensions may be on the downside in the near future, but nothing is certain, and the current risk premium does not seem particularly high.

This volatility spike highlights how technical factors can sometimes drive markets to the detriment of fundamentals. This end-of-summer period seems to be appropriate to reassess the risks we are willing to be exposed to in our portfolios and to adopt a diversified approach in terms of asset allocation.

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

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

A shock of volatility to raise the right questions

While the consequences of the mini-crash at the beginning of August were not too serious, it should serve as a wake-up call.

Signs of tension

During the first week of August, the financial markets experienced an episode of unprecedented volatility, reminding everyone that investors were no longer necessarily in a serene mood. During this episode, the VIX index, which measures volatility and hence tension in the S&P 500 index, reached a level of over 65, which is quite simply the 3^rd highest peak in its history. For he record, the two most severe peaks before that were the collapse of Lehman Brothers in 2008 and the materialisation of the scale of the COVID pandemic in 2020. I’m sure you’ll agree that this beginning of August had nothing in common with those two historic moments. So what happened?

Some complacency on the markets

As with any phenomenon of exceptional magnitude, there is never just one factor that explains it. The first phase of the crisis corresponded to the announcement of worse-than-expected US employment results. Fears of a marked slowdown in US growth were suddenly reawakened. As a result, the equity markets reacted negatively and the VIX rose, although nothing really dramatic until then. However, at the same time, the Japanese central bank announced that it was raising its key rates by 15bps, 5bps more than the market was expecting. The almost simultaneous combination of the two pieces of news had a scissor effect, with many JPY/USD carry trade positions being sold off in a hurry. It became clear that many speculators were borrowing in JPY at rates close to 0% in order to invest in USD assets, in the knowledge that short-term ‘risk-free’ US rates were in excess of 5%. This is an unfortunate reminder of the trend in the 2000s to borrow CHF mortgages to invest in EUR property, with the result that we are all familiar with.

The snowball effect

It’s at times like these that a good understanding of market structure can be essential. Many players, notably investment banks but also funds, are once again shorting volatility. After the VIX surged, they had to react quickly to cover their positions and rebalance their books. And they did so simultaneously, because they were all moving in the same direction, against a backdrop of low liquidity for the beginning of August. You know the rest of the story: the VIX reached these particularly high levels. Fortunately for these traders, the markets came to their senses and things normalised quickly enough not to trigger any a priori disasters. To date, the JPY/USD carry trade positions have largely been sold off.

What lessons can we learn from this?

This episode highlights the way in which events can unfold in some market configurations. Technical factors can run ahead of fundamentals, which is why good risk management is more essential than ever when it comes to investing. Another consequence is that the market looks more ‘fragile’ than it did at the beginning of the year. Clearly, central banks are not going to hesitate to cut rates to counter a more marked economic slowdown, while hoping that inflation is at an acceptable level, but the depth of the market has been reduced. Yes, NVIDIA can continue its meteoric rise by trying to meet the huge CAPEX requirements of the US tech giants, but the market is likely to be disappointed. Yes, India is seeing its promising growth confirmed, but it is also reasonable to think that the valuation of Indian small/mid-caps has become excessive. Yes, geopolitical risks may diminish in intensity in the near future, but unfortunately nothing is less certain and the associated risk premium does not seem particularly high to me.

To sum up, this end of summer seems to be a good time to ask ourselves what type of risk we want in our portfolios and to favour a diversified approach in terms of asset allocation.

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

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