Market Insights March 17, 2025

3'000! 

In an environment marked by equity market volatility, gold continues to shine, recently reaching new all-time highs, surpassing $3,000 per ounce and CHF 85,000 per kilogram. This renewed interest in gold reaffirms its key role in a diversified portfolio as a decorrelated asset. At the same time, other precious metals, such as silver, are beginning to show signs of recovery, although they remain well below their historical peaks.   

Since the beginning of 2024, inflows into gold ETFs have increased by 5%, though they still lag significantly behind the record levels of 2020. China, in particular, driven by both private and institutional investors, remains a major force behind this demand.   

While short-term sentiment has turned positive, gold’s underlying momentum remains strong, reinforcing our constructive outlook on the asset. In an uncertain economic climate, gold continues to stand out as a strategic safe haven, warranting consideration for portfolio diversification. 

Capitulation in US Markets?

The S&P 500 has now recorded its fourth consecutive week of decline, officially entering a correction phase, defined as a drop of more than 10% from its previous all-time high. That high was reached in mid-February, meaning we are witnessing a rapid and significant downturn in US equity markets. But is this weakness justified? 

Over the past month, mounting concerns have crystallized around the repercussions of President Trump's economic policies. In particular, his erratic stance on imposing tariffs on key US trading partners has severely undermined both consumer confidence and corporate sentiment. This growing distrust toward Donald Trump raises fears of a slowdown in household consumption and a decline in business investment, exacerbated by an environment of reduced economic visibility. Such conditions inevitably revive concerns over a potential US economic recession. 

However, we believe this scenario remains unlikely given the current economic backdrop. First and foremost, the US labour market remains exceptionally robust, despite signs of gradual deterioration. Low unemployment and ongoing disinflation continue to provide substantial support for consumer spending, an essential driver of US economic growth. The temporary dip observed in January and February retail sales may well be attributed to seasonal factors, such as adverse weather conditions and a severe flu season, rather than an atypical decline in household confidence. 

Moreover, a contraction in US GDP appears improbable, as leading economic indicators remain firmly in expansionary territory, particularly within the services sector. 

Additionally, the Federal Reserve retains significant room for manoeuvre to support the economy. In fact, a resumption of monetary policy easing is expected as early as June. 

Given these factors, we view the prevailing investor pessimism, currently at extreme levels, accompanied last week by a surge in equity market volatility, as exaggerated. Historically, such a sharp deterioration in investor sentiment has often been followed by a market rebound, which is what we anticipate in the near term. While it is likely that President Trump’s tenure will continue to bring sustained market volatility, the extent of the underperformance of US risk assets relative to their European counterparts suggests a potential recovery. 

This week's figure: 0.25 %

The Swiss National Bank (SNB) is expected to further ease its monetary policy this week with a 0.25% rate cut. While the Swiss economy continues to demonstrate resilience and the Swiss franc has recently weakened against the euro, this reduction could mark the final cut in the current cycle.