Companies and investors on hold
Some calm has returned to the markets this week and the equity markets have recovered slightly. Nevertheless, the situation remains tense. The effect of the trade tariffs will only be felt in the coming quarters and investors' main focus is therefore currently on the outlook.
Current week at a glance
Some calm has returned to the markets this week and the equity markets have recovered slightly. The S&P 500 Index is now "only" at -5% since "Liberation Day" on 2 April and the yield on the 10-year US government bond has fallen slightly to 4.3%. Nevertheless, the situation remains tense, as shown by the high VIX index level (volatility index) of 28 and the significant depreciation of the US dollar. Europe's stock markets (including Switzerland) performed similarly to the US stock market. Thanks to the strong first quarter, the European share indices are back in positive territory for the year 2025. Some companies have already presented their quarterly results, which were solid as expected. However, this is currently only of marginal interest, as the effect of the trade tariffs will only be felt in the coming quarters and investors' main focus is therefore currently on the outlook. So far, however, little insightful information can be derived from this, as the majority of companies have simply dispensed with guidance and are no longer able to assess their own business performance due to the uncertainties. Companies and investors remain on hold.
Outlook and assessment
Further important quarterly results from Apple, Amazon and Meta will be published next week, with the above-mentioned trend of missing guidance likely to continue. Even without guidance, we expect analysts to revise their earnings expectations for 2025 (previously around +9%) downwards in view of a looming economic slowdown (from 2.8% in 2024 to 1.4% in 2025).
Possible deals in the trade dispute, on the other hand, could come as a positive surprise. Basically, we expect that we have seen the climax of the customs dispute. Our main scenario of a difficult but final compromise is gradually materialising. However, if the negotiations take too long, this will be reflected in weaker growth figures. The focus will be on the labour market figures in the US next Friday, although consumer confidence on Tuesday 29 April will be more relevant for future developments.
The rebalancing effect at the end of the month will also be technically interesting. Due to the heavy equity losses, their weighting in the portfolios is significantly below their strategy weighting, which will trigger larger purchases. However, if the rebound fails to materialise, this would be an indication of continued scepticism among investors and should therefore be viewed negatively. Overall, we consider the pros and cons for equities to be balanced at the moment.
Changes in investment tactics
We have made no further adjustments this week and are maintaining a neutral equity position, underweighting the US regionally in favour of the UK and emerging markets. In currencies, we are reducing our strong underweight in the US dollar, while in equities we are realising the gains in financials and at the same time raising the equity allocation back to the neutral strategy allocation.
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