A disturbed 1st quarter

Most stock exchange indices closed the quarter in the red. Swiss bonds suffered from rising rates, resulting from synchronised global growth. Globally bonds are impacted by the change in talk by central banks (raising rates by the Fed, a more restrictive speech by the ECB). Real estate, especially in Europe, is impacted by the benefit taking of investors after an outstanding year 2017 and excellent valuations. Looking at equities, the correction 2018 comes from rising bond rates, which have accelerated beginning of the year. Furthermore, there is the 4^th rate hike of the Fed since beginning 2017 and economic figures which are solid, but which are not progressing. Then there is the increased risk of trade war, especially between the US and China. The situation of the tech companies is also disturbed, especially by the companies regrouped under the acronym FAANGs, with Amazon having its fiscal model questioned and Facebook facing consequences due to illegal data collection.

We believe the correction of equities is welcome as after a strong beginning of the year, they come back to evaluation levels close to their historical means. As illustrated by Swiss equities, by cumulating the loss of about 5% with the expected earnings forecasted for 2018, Swiss equities trade close to a level of P/E of 16x. With an increased volatility compared to last year, active management remains essential, with a stringent stock selection of defensive quality companies, offering regular growth of profits over the long term.