Monthly Report December 2024

The betting and financial markets had already early on predicted a Trump victory – unlike political experts and polls, which continued to forecast a tight race between the two candidates right up to the US Election Day on November 5. Once again, the “wisdom of crowds” proved to be accurate.

The US stock markets experienced their best month of the year in November. The S&P 500 rose by 5.7% to a new all-time high of 6,032. This marked the 53rd record high of the year for the US index, which was up 26.5% for the year to date. The tech-heavy Nasdaq Composite recorded a gain of 6.2%, bringing its year-to-date performance to 28.0% by the end of November. The Russell 2000, an index of smaller and mid-sized companies, benefitted particularly from expectations of deregulation and protectionist economic policies under Trump, rising 10.8% during the month.

In Switzerland and Europe, stock market developments were more subdued. The Swiss Leader Index (SLI) gained 0.7% in November and showed a year-to-date increase of 9.2%. The pan-European Stoxx 600 rose nearly 1.0% over the month and was up 6.5% year-to-date.

In China, the effectiveness of state stimulus measures appeared to diminish. The Shanghai Composite gained 1.4% in November and was up 11.8% year-to-date. Japan’s Nikkei 225 showed no clear trend over the month and recorded a year-to-date performance of 14.0% by the end of November.

The yields on 10-year US Treasury bonds fell significantly in the last week of November from over 4.40% to 4.18%. This coincided with the appointment of Scott Bessent as the future US Treasury Secretary under the Trump administration. In Europe, yields on 10-year government bonds also notably dropped. A striking development was that for the first time in history, French government bonds offered a higher yield than Greek bonds.

The price of gold, which had been just below $2,800 at the end of October, fell below $2,600 in November before stabilizing between $2,660 and $2,680 by the end of the month. The price of oil continued its downward trend. A clear winner of the Trump victory was Bitcoin, whose price surged by over 40% since the election in early November.

In the currency market, the US Dollar Index (DXY) recorded its strongest gain since the beginning of the year with a 1.6% increase the day after the election. However, the dollar rally lost some momentum in the final week of November. The USD/CHF exchange rate rose to 0.895 before closing the month at 0.881. The EUR/CHF exchange rate came under slight pressure during the month, ending November at 0.931, only slightly higher than at the start of the year.

Due to seasonal trends, this should be the most beautiful time of the year for stock market bulls as jingle bells begin to ring in the distance. Risk assets tend to perform particularly well in December, with stocks experiencing their strongest phase in the last week of the month – after Christmas. Since 1950, December has been the strongest month for the S&P 500. International stocks have also tended to outperform during this period, with strong performances often seen in Chinese equities and gains in the Nikkei 225.

Gold has also shown notable seasonality in December and January. November 2024 ended for the precious metal near $2,680, marking its first monthly loss since June, which was a mere decline of one dollar. The last significant drop dates back to September 2023. Despite this consolidation, gold’s upward trend for the year remains remarkable, and seasonal strength is expected to continue.

For the US dollar, December has traditionally been the weakest month in the 21st century. The Dollar Index has declined in six of the last seven years. The recent drop may have been influenced by early repatriation flows toward the end of the year. The focus now is on the US Federal Reserve’s interest rate decision on December 18, with a rate cut still considered likely.

In line with the typical weakness of the dollar, the euro has tended to gain strength in December. Despite an overall pessimistic sentiment toward the common currency, a short-term recovery attempt cannot be ruled out.

The Third Time’s The Charme

Donald Trump is running for president again, and many voices in Washington are already talking about a potential golden era, akin to the “Roaring 20s”. His first election in 2016, which was a surprise even to him, was often chaotic. After his defeat in 2020, however, he had four years to rethink his strategy, particularly optimizing his personnel choices. By the time of his inauguration on January 20, 2025, about 10,000 positions will need to be filled – a crucial factor that is likely to be approached more systematically this time.

Markets are optimistic in light of Trump’s key promises. The main drivers of this euphoria are tax cuts, deregulation measures, and the goal of swiftly ending global conflicts. Additionally, designated Treasury Secretary Scott Bessent has introduced a concise 3-point plan: reducing the budget deficit to 3% (currently around 6%), achieving a real annual economic growth rate of 3%, and promoting an additional 3 million barrels of crude oil production daily in the US.

In the coming months, we expect a global slowdown in economic growth. This is partly due to necessary budget cuts to reduce state deficits. Furthermore, the shift in supply chains – whether through reshoring or friendshoring – will weigh on growth in the short term. During this phase, inflation rates are likely to remain elevated or even rise slightly before the measures taken show their effect. Central banks will continue their rate-cutting cycles, albeit to a lesser extent than markets expect – except for the Bank of Japan, which will maintain its course of rate hikes.

For the stock markets, this mix could lead to increased volatility. We plan to slightly reduce equity exposure in the current seasonal strength. Our focus on gold remains unchanged. During an economic slowdown, high-quality medium- and long-term government bonds could become particularly attractive. To guard against potential inflation surprises, we are maintaining a moderate position in inflation-protected bonds. We prefer investment-grade bonds over high-yield bonds and are complementing our portfolio with trend-following funds that offer excellent diversification.