Stock markets put in a patchy performance


Investment Report, 30 June 2018



Following a distinct correction by the key indices in May, the stock markets somewhat calmed down again   in the reporting month of June. The broadly diversified MSCI World Index (-0.67%) has virtually not changed since the beginning of the year, while the Swiss SPI Index (-4.3%) is still in the minus. With their export-oriented economic output particularly sensitive to the current US trade policy, the emerging markets are facing a bleaker picture (-4.9%).

In April, ten-year yields on US government bonds passed the 3% mark for the first time since 2011. By the end of June, the yield had dropped slightly to 2.9% due to rising political uncertainty. The bond markets have been mostly in the minus since the beginning of the year. According to the SBI AAA-A TR (-0.6%), this year CHF bonds are slightly below their previous year’s value. Corporate bonds (-0.7%) and especially emerging markets bonds (-4.7%) have been affected by higher credit spreads. Due to their weak currencies, the latter came under pressure in the reporting month, albeit less so than in May. 

In March and June, the Fed raised the key interest rate to currently 2.00%. The consensus expects another interest rate adjustment in September 2018, which the market has already priced in. This is due to the consistent recovery of the labour market which shows initial signs of wage inflation in certain branches of industry. The European Central Bank (ECB) and the Swiss National Bank (SNB) are retaining their low-interest rate policies for the foreseeable future. 

Currencies: Nascent political uncertainty has led to a flight to safe currencies this year, among them the CHF, the USD (+2.8% against the CHF) and the JPY (+3.4%). By contrast, the EUR (-1.2%) and the GBP (-0.3%) have lost ground against the CHF. A number of emerging markets currencies were badly affected.


Following the adjustments in March and June, consensus estimates suggest that the Fed will carry out another interest rate hike in September. In Europe, higher interest rates are not expected until late 2019. The consensus estimates of 2018 GDP growth were raised slightly and amount to 2.8% for the USA, 2.3% for Europe and 2.0% for Switzerland.

The current economic environment suggests higher key interest rates at the short end. However, the leeway for a further hike is limited after yields have risen on the bond markets, especially in the USA – the more so as the upswing is now slowing down. The historically low risk premiums and long durations of the underlying benchmarks are making bond investments less attractive.

Monetary framework conditions have somewhat clouded over due to more restrictive US monetary policy, rising commodity prices and uncertain trade policy. Although, given consistently favourable economic data and corporate financial statements, investor sentiment on the stock markets remains constructive, investors must be prepared to accept higher volatility.

In the first half of the year, Pool 20, the most popular among the GEMINI pools, generated a return of -0.36%. All bonds remain underweight. The percentage of unlisted Swiss real estate investments was raised through thoroughly vetted investments at the expense of listed real estate investments.

Returns, investment categories Pool (20/35/50) as a percentage, 1 Jan. to 30 June 2018

Investment categoryGEMINI1)Benchmark 1)
Bonds CHF-0,60-0,56
Foreign currency bonds-1,56-1,56
Convertible bonds-1,15-1,60
Swiss equities-4,00 -3,95
Foreign equities0,940,87
Swiss real estate1,991,24
Alternative investments2)0,82-

1) GEMINI figures include asset management costs, benchmark figures exclude costs

2) Currently being reduced. No strategic percentage since 2010

Returns generated by the GEMINI Pools as a percentage, 1 Jan. to 30 June 2018

Pool 20Pool 35Pool 50Pool 0
GEMINI 1)-0,36-0,73-0,710,48
Benchmark 1)-0,59-0,70-0,750,28
Pictet BVG 25/40/60 -0,95-0,73-0,41n.a.

1) GEMINI figures include asset management costs, benchmark figures exclude costs

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