To everyone's surprise, Thomas Jordan announced that he would stand down at the end of September after more than 12 years at the helm of the Swiss National Bank (SNB). His name will be closely tied to a period in which the SNB had to navigate many crises. Just after being appointed to the Governing Board, and long before becoming Chairman, he had to help steer the bank through the 2008 financial crisis, overseeing the stabilisation fund set up as part of the UBS bailout. Moving full circle, 15 years later, he helped to engineer the bailout of Credit Suisse, then the country's second-largest bank. He was also involved in many other tough – and often unprecedented – decisions, such as the removal of the Swiss franc's partial peg against the euro and the introduction of negative interest rates. These moves were sometimes criticised by business leaders in both the export sector and the banking industry, although with hindsight they seem to have been the right ones to make given the tricky national and international context. Under his leadership, the SNB also managed the COVID-19 pandemic and the war in Ukraine relatively well – it succeeded in maintaining the Swiss economy's resilience and kept a lid on inflation. Now that monetary policy has returned to normal in Switzerland and around the world, is Thomas Jordan perhaps worried that he might get bored? Is that why he's leaving well before reaching the official retirement age? We may have to wait for his memoir to find out. With his successor not yet known, he still has one key decision to make before he goes. Swiss inflation dropped to an annualised rate of 1.2% in February, so another change in monetary policy is on the cards, although the date of that announcement is not yet known. Will the SNB fall into line with other central banks and cut rates in June or will it beat everyone to it and make the move on 21 March? The franc has lost ground recently, which suggests it could be the second option. We’ve increased exposure to the euro by 2% in our Swiss-franc-denominated portfolios as a result.
Last Monday, the Nikkei index broke above the 40,000-point mark for the first time ever, driven up by the yen's continued depreciation and large inflows from foreign investors. In the first two months of the year, the yen was down 6% against the US dollar, having already dropped 7% in 2023. In the past, a weaker yen has meant a stronger stock market uptrend, and vice versa. The likelihood that the Bank of Japan (BoJ) will raise interest rates at its meeting on 19 March currently stands at close to 70%, which has sparked fears that its capitulation could strengthen the yen, which is undervalued at the moment. Despite this, foreign investors are aggressively re-entering the Japanese market, which has been largely underweighted in recent years. That explains why foreign inflows have been so strong in recent months, spurred by progress on governance reforms in the country. This week's data on annual wage growth could prompt a pivot by the BoJ, which, in turn, would lead to an uptick in volatility on the yen and Japanese assets. We'll have to wait and see whether investors' renewed interest in Japan can withstand the risks of a stronger yen and less attractively priced equities.
Gold reached an all-time high of USD 2,195 per ounce. Despite this strong momentum, sentiment on the metal is neutral, and private investors have not been tapping into this trend. That suggests gold offers further upside.