Marc-Christian Bollet, Head of Client Relationship Management
Political risks drove stocks down, while corporate profit margins remained strong and overall economic growth remained resilient. But it is not only equities which suffered from the political news. Almost all asset classes have been affected such as real estate, high-yield bonds, or oil. We had anticipated an increase in volatility but its amplitude surprised us. Indeed, to give an example, the Swiss market corrected “only” -1.5% at the end of November but ended the year with a decrease of -8.6%. During the month of December, which was the worst month of December since 1931 for the S & P500, the geopolitical risks (trade conflict USA vs. China, Brexit, Shutdown US, yellow vests) took over and investors reduced their risks.
After the recent correction observed, the valuation of equity markets is returning to historical norms. Stock indices fell as corporate profits continued to grow, reducing the price of shares. The sky has not yet cleared and the political and economic clouds are still present, which is why stock selection will remain paramount for the year to come.