Mixed global economic picture – high-quality stocks represent an interesting proposition

Investment Policy, March 2024

Mixed global economic picture – high-quality stocks represent an interesting proposition

The economic data currently paints a more robust picture for the US economy than its Eurozone counterpart. US companies have also been able to report more convincing earnings growth of around 7% in their financial statements. The improvement in profit margins, driven by technology, communications and Internet companies, came as a particular surprise. All in all, the quarterly results on Wall Street turned out better than had been expected by the consensus view of analysts. This likewise explains the good performance posted by the world’s most important equity market – the US accounts for over 60% of the world equity index. High-quality stocks represent an interesting proposition.

The economic data coming out of the world’s major economies paints a mixed picture. A still robust labour market and capital investments by the government have until now kept the US economy more stable than the Eurozone economy. Germany, in particular, is experiencing significant weakness in terms of economic growth, as reflected by a spike in unemployment from 5% to 5.8% over recent quarters, for example. The seemingly incompetent economic path embarked upon by the government in Berlin is not helping matters, nor are the budget changes enforced by the country’s Federal Constitutional Court, as less generous government spending is likely to put the brakes on economic growth in both Germany and the Eurozone. The Swiss economy is holding up better than its European neighbour, which is due in no small part to the less cyclical composition of Swiss exports. The high share of pharmaceutical products, which are not so dependent on economic growth, in Switzerland’s total exports proves beneficial during phases in which there is the prospect of a global economic slowdown.


The fairly robust economic data in the US to date and the predominantly convincing results posted by US firms are partly responsible for the good performance of US equities relative to European stocks, which are currently receiving less support from the economy. In the event of a global slowdown in economic growth, Swiss equities represent a relatively interesting proposition. There are two reasons for this. Firstly, Switzerland’s equity index is made up of fewer cyclical industries than is the case for the world equity index or the Euro Stoxx index, which comprises stocks of Eurozone countries, for example. Secondly, interest rates and inflation in Switzerland are the lowest of all industrialised countries, suggesting that valuations will tend to be higher over the medium term. The stable Swiss franc also demonstrates the attractiveness of Swiss equities over a long-term horizon. However, global high-quality stocks of companies with above-average levels of profitability, stable earnings growth and relatively low debt also appear interesting at present. Since January, global high-quality stocks have even outperformed Swiss equities. The bank’s Investment Committee has therefore decided to make a slight change in the equity space: the overweighting of Swiss equities is to be retained and modified slightly, with the weighting of global high-quality stocks being increased by 1.25% relative to Swiss equities. The latter nevertheless remain overweighted at a level of 2% compared to their global counterparts (for balanced portfolios, other risk profiles adjusted proportionally).

An as yet robust labour market and government spending are keeping the US economy more stable than the Eurozone economy.

Gérard Piasko, Chief Investment Officer


Bonds have become more volatile again recently, with this being especially true in the case of US government bonds. This is due expectations with respect to how US interest rates will develop over the coming months changing once more. The background to this change is formed by the continuing relative stability of the US economy and labour market, on the one hand, and the renewed increase in volatility for headline inflation data, on the other. During phases of spiking uncertainty, it is likely to prove appropriate to focus on high-quality bonds. With this in mind, we are therefore favouring bonds with a better credit quality, meaning we are giving preference to investment-grade bonds over high-yield bonds. For the time being, we also continue to prefer domestic bonds denominated in Swiss francs that are of above-average quality and have a good credit rating. As mentioned, Swiss investments, and bonds in particular, are receiving support from the very low level of inflation in Switzerland compared to the rest of the world.


It does not really come as any surprise that the exchange rate for the EUR/USD, the world’s most traded currency pair, has been subject to particularly high fluctuations since January. At the turn of the year, expectations of interest rate cuts by the European Central Bank were still high. However, at the World Economic Forum in Davos and on other occasions, the President of the European Central Bank Christine Lagarde attempted to once again dampen the financial markets’ hopes of interest rate cuts. As a result, the euro rose to 1.11 against the greenback at the beginning of 2024, before signs of profit-taking appeared once more. In parallel to this, the US dollar fell to below 0.84 against the Swiss franc at the start of January. It did subsequently stage a recovery, however. The fact that election polls suggest there is an increasing chance of Donald Trump returning to the White House could also weigh on the euro against the US dollar and the Swiss franc, as should he return for a second term, more protectionist measures would have to be expected from the US against the EU (and China).


Traditionally, the development of the oil price has been especially important for the performance of the so-called commodities composite. The International Energy Agency, which is based in Paris and advises the most important industrialised nations on energy issues, has increased its estimate for oil supply growth to 1.5 million barrels per day. This represents a marked increase in its supply estimate and is justified by increases in production, especially in the US and Brazil. As the International Energy Agency currently also anticipates a slowdown in global demand growth, the potential resulting supply surplus also explains the decline in oil prices despite the tensions in the Middle East. The conclusion could thus be that within the commodities space, the fluctuations in oil could be more significant than those in gold, as there are more sources of uncertainty. Generally speaking, gold therefore appears to make more sense as a traditional diversification element as part of a balanced portfolio than highly volatile oil.

Gérard Piasko

Gérard Piasko

Gérard Piasko is Chief Investment Officer and head of the investment committee of private bank Maerki Baumann & Co. AG. Before he was for many years Chief Investment Officer of Julius Baer, Sal. Oppenheim and Deutsche Bank.

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Editorial deadline: 28 February 2024

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