The announcement of new tariffs by US President Donald Trump triggered sharp falls on the equity markets. Initially the US stock market above all was badly affected by the sell-off. But last Friday the European bourses and Swiss stocks also took a beating. The sell-off has been continuing today, and the past months’ encouraging gains have vanished into thin air. We had already reacted to the growing economic and political uncertainties by aligning ourselves more defensively. Currently we are continuing to take profits and reducing our equity exposure.

The new investment year started turbulently – at least where geopolitical developments are concerned. US markets stuttered temporarily. By contrast, our overweight in Europe is paying off. Hopes of a solution to the war in Ukraine and fresh elections in Germany are buoying markets.

With the victory of Donald Trump, the balance of power in the US Congress for the next four years has been clarified: everything is now in place for a basically business-friendly policy in the US. The global rate-cutting cycle continues, and the SNB is sending a clear signal against deflationary risks. The ECB is also easing, with the Fed likely to follow suit. This situation should be viewed as fundamentally positive for the financial markets and for the start of the new year.

Over the last few months, the financial markets have repeatedly reacted to fluctuations in the latest polls on the 2024 US presidential election – particularly after the challenger on the Republican side turned out to be Donald Trump. With the withdrawal from the race of incumbent President Joe Biden and the nomination of Kamala Harris, the outcome of the election was thrown wide open again. A neck-and-neck race had long been on the cards. As of yesterday, we know that Donald Trump will be the next occupant of the White House. The Senate too will fall into Republican hands, whereas the composition of the House of Representatives will not be known for some weeks yet.

The leading economic indicators are painting both a light and dark picture. The US central bank (Fed) is sitting on its hands for now and has confirmed its existing pathway of restrictive monetary policy. This constellation is weighing on equities. US technology stocks are leading the global equities sell-off. Government bonds are appreciating strongly. Our basis scenario remains unchanged.