July, an excellent month… for large caps

20th August 2018
-IAM, News

Marc-Christian Bollet, Head of Client Relationship Management

The quarterly results season comes to an end and the Swiss market (SPI) progressed by +5.5% in July, +1.4% since the beginning of the year. The reduced commercial tensions between Europe and the US and a well oriented economic growth are part of the explanation. However the rebound in the Swiss market is mainly driven by the quarterly results, with earnings continuing to grow and margins of companies remaining satisfactory.

When we analyse this evolution, we see that the large cap index (SMI) gained 6.6%, while the mid caps (SMIM) progressed by 3% and the small caps of the SPI lost 1.1%. Large caps indeed posted results better than expected – see Roche and Novartis. Furthermore, since the beginning of the year these titles had been left behind, which explains the following rebound of more than 10%. Banking stocks also performed well, thanks to quarterly results above expectation; likewise Nestlé, with an encouraging momentum of organic growth of its sales revenues. At the other end, especially in the mid and small cap sector, companies, such as GAM, Dormakaba, Rieter or Meyer Burger, which posted prudent perspectives were penalised.

We see that the market is becoming more selective and company selection is an essential contributor to the performance. We remain tranquil in this environment, as since more than 20 years IAM concentrates on title selection, which is the foundation of our above average performance in Swiss equities.