Monthly Report June 2024

The old stock market adage “Sell in May and Go Away” proved unhelpful by the end of May 2024. Instead, equity markets ignored a historically weak month and delivered an impressive performance.

In the US, the S&P 500 ended the month up 4.8%, marking its best May performance since 2009. The tech-heavy Nasdaq Composite rose 6.9%, and the small-cap Russell 2000 increased by 4.9%.

In Europe, the defensive Swiss Market Index (SMI) stood out with a 6.6% gain, while the broader Swiss Leader Index (SLI) rose by 6.4%. In contrast, the pan-European Stoxx 600 increased by only 2.6%, and the UK’s FTSE 100 by 1.6%.

In Asia, Japan’s Nikkei 225 barely held ground with a 0.2% gain, while China’s Shanghai Composite lost 0.6%.

Year-to-date, the Nikkei led with a 15.0% increase, followed by the Nasdaq Composite (+11.5%) and S&P 500 (+10.6%). The STOXX 600 rose 8.2%, and the SMI 7.8%. The Shanghai Composite advanced 3.8%.

The yields on the closely watched 10-year US Treasuries fell from 4.64% to 4.50% over the month, while 10-year German bund yields rose slightly from 2.58% to 2.66%. Swiss 10-year bond yields also saw a slight increase from 0.75% to 0.84%.

In commodities, Brent crude oil failed to maintain its April level of nearly $90, ending May just above $80 per barrel. Gold, which peaked around $2,450 per ounce during the month, closed at $2,347 but remained up 13.3% year-to-date.

The Dollar Index (DXY), which measures the USD against a basket of six major currencies, ended the month 0.8% lower. The Swiss franc gained 1.9% against the US dollar and 0.3% against the euro, although it had previously seen significant declines.

Looking ahead, forecasts and market opinions diverge widely as usual. Some strategists predict upcoming deflation, while others foresee higher inflation rates persisting for an extended period. Experts are also divided on future economic growth. Additionally, central banks’ policy decisions, driven by historical or anticipated inflation and economic data, remain unpredictable. The approaching US elections in November are already casting their shadow. Adding to this mix are increasing international tensions and potential major climate disruptions due to the El Niño phenomenon.

Despite the aforementioned uncertainties, market signals suggest a different and relatively calm narrative: risks are acknowledged, and expected price fluctuations, as indicated by volatility indices (VIX and MOVE), are relatively low. This generally indicates a potential for continued rising stock prices.

However, a closer look under the hood reveals early warning signs. In the US, defensive sectors like utilities have emerged as leaders both in the past month and year-to-date. The weaker oil price and lower yields on 10-year US Treasuries also point towards an economic slowdown.

Further, ratios such as AUD/CHF, copper/gold, and Bitcoin/gold trending downward suggest “Mr. Market” expects a more challenging environment.

Moreover, current bullish positioning in S&P 500 futures is historically a contrarian indicator, often signaling potential overconfidence.

All these market signals urge caution, even if the surface appears calm.

In the future, we will maintain a broad diversified approach, holding both gold and long-term government bonds to hedge the equity portfolio.