Swiss stock exchange looks back on a pleasing first half of 2024
Published: Monday, Jun 24th 2024, 12:10
Updated At: Tuesday, Jun 25th 2024, 01:59
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If the stock market year 2024 had now come to an end, most investors would probably be satisfied with the share price performance. After all, a price gain of around ten percent is considered above average. But the stock market sky is not as clear as it seems. And new clouds are gathering.
In concrete terms, the Swiss benchmark index SMI had gained almost eight percent in the first half of the year to just over 12,000 points by the beginning of last week. If dividends are also included, the figure is a good eleven percent. This puts the SMI well on a par with the German DAX (+8.4%).
However, the US technology stock exchange Nasdaq or the much-noticed US index S&P 500, which in contrast to the SMI are still practically at record highs, have performed even better with gains of almost 18 and 15 percent respectively.
Fall in inflation creates interest rate fantasy
There are several reasons for the strong development. Inflation has lost much of its terror. This has awakened hopes of interest rate cuts and provided the stock markets with the fuel for rising prices. Added to this was the hope of a brighter economic climate in Europe and the associated rise in corporate profits.
However, as is so often the case, neither the development of inflation nor that of the stock markets is a one-way street. And there have also been setbacks. After a subdued start to the year, an upward trend set in in February, followed by a correction in March that wiped out the initial gains for the year. However, a strong bull market set in again in May, which then led to new highs on many stock exchanges. However, the market has been consolidating again since the beginning of June.
Hype about AI
Technology stocks were particularly sought after in May. Anything that could be associated with artificial intelligence (AI) was bought. The hype surrounding AI led to new share price records, particularly in the USA.
The stock market valuation of individual US companies such as Nvidia, Apple and Microsoft rose to new heights. At more than three trillion dollars, the value of AI chip manufacturer Nvidia alone is around 3.5 times Switzerland's GDP.
The SMI was unable to keep up with this. This is because it is dominated by the defensive pharmaceutical heavyweights Novartis and Roche as well as the food giant Nestlé. And since the music is played in the technology sector, the defensive card just didn't cut it.
In the political headlock?
However, it is uncertain whether the profits can be maintained throughout the year. This is because new uncertainties are looming on the horizon. In France, for example, elections will be held on June 30 and July 7. After incumbent President Emmanuel Macron suffered a defeat in the European elections, he wants to reappoint the National Assembly.
Investors fear that Macron could lose and that France, which is already heavily indebted, could then become even less debt-conscious. One sign of these concerns is the franc, which is flexing its muscles again despite the interest rate cut against the euro.
In addition, the US presidential election in November is another factor that could trigger new turbulence on the markets. Depending on the outcome of the election, new geopolitical and global economic trouble spots may emerge.
In addition, the Fed simply does not want to loosen monetary policy yet, citing inflation and the good state of the US economy. "So far, this has gone well because of the hype surrounding AI," says one trader. "But if the economy loses momentum, this could suddenly become a game changer and an interest rate cut could be received negatively on the markets."
Against this background, one trader believes that most Swiss investors would probably be satisfied with a profit of eleven percent at the end of the year.
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