Recovery for US stock markets
Following four consecutive weeks of decline, US equity indices stabilized last week. However, the rebound remains modest, particularly within the technology sector, as reflected in the Nasdaq's subdued performance. Investor sentiment continues to be weighed down by lingering uncertainties, notably the looming implementation of new import tariffs expected by early April.
Is consumer confidence already beginning to erode? Disappointing US retail sales figures for February suggest it may be. Whether this signals a genuine economic slowdown or merely seasonal noise remains to be seen. Federal Reserve Chair Jerome Powell acknowledged recent signs of economic weakening and reaffirmed the Fed’s intention to ease monetary policy in 2025. Indeed, two 25 bps rate cuts remain on the agenda following the Fed’s latest meeting.
Encouragingly, the potentially inflationary policies proposed by Donald Trump appear unlikely to derail the Fed’s current roadmap, offering a degree of reassurance to investors and supporting the gradual recovery of US equity markets.
Switzerland likely to avoid a return to negative interest rates
The Swiss National Bank (SNB) has once again lowered its policy rate, reducing it from 0.50% to 0.25%. This move was widely anticipated by both economists and market participants. It marks the SNB’s fifth rate cut within the past twelve months. Over this period, the SARON rate has been reduced by a cumulative 150 basis points, a remarkable degree of monetary easing in the absence of a recession.
However, this rate-cutting cycle may now be nearing its end. The resilience of the Swiss economy, combined with the expectation of aggressive fiscal stimulus from key European trading partners, most notably Germany, diminishes the likelihood of further disinflationary pressures in Switzerland. Indeed, consumer price inflation appears to be nearing a floor. The recent moderation in headline inflation is largely attributable to declining energy prices, particularly electricity. In contrast, core inflation, which excludes the more volatile components of food and energy, has not eased as significantly.
Given this backdrop, the SNB is likely to keep its policy rate above the ultra-sensitive threshold of 0%. The central bank has not forgotten the widespread criticism it faced during the era of negative interest rates (2015–2022) from political actors, industry leaders, and the financial sector alike.
In our view, only an exogenous shock, such as a severe geopolitical event, would justify a resumption of monetary easing. In a normalized economic and political environment, the SNB will likely confine itself to managing excessive Swiss franc appreciation through targeted foreign exchange interventions, as it has done in the past.
Swiss bond markets have already begun to price in the end of monetary loosening. Recently, 10-year Confederation yields rebounded toward 0.70%, after briefly approaching 0% in December. This upward movement in long-term Swiss rates has weighed on the performance of CHF-denominated fixed income portfolios year-to-date. However, it is likely welcomed by Swiss pension funds and certain yield-seeking private investors.
This week's figure : 26%
Copper has gained 26% year-to-date. While this surge is likely driven in part by US purchases ahead of forthcoming tariffs on metal imports, it also appears to reflect underlying economic resilience.
Author
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Daniel Varela holds a degree in business administration with a specialisation in finance from the University of Geneva and began his career in 1989 as a fixed income manager. He joined Banque Piguet & Cie in 1999 as head of institutional asset management and with responsibility for bond analysis and management. In 2011, he became head of the investment strategy and Piguet Galland's investment department. In 2012, he joined Piguet Galland's Executive Committee as CIO.
