The outbreak of the war in Israel has further intensified geopolitical concerns in October. Stock markets have not received this well and momentum has therefore deteriorated further. We therefore remain slightly underweight in equities globally, as the mix of low risk premiums, poor momentum and geopolitical risks continues to put pressure on equities.
However, we are capitalising on the relatively heavy losses on the Swiss stock market to make acquisitions. With a correction of eleven percent, this was significantly stronger than the MSCI World.
Bonds back in the game
Despite the geopolitical trouble spots, sentiment indicators are in the neutral range on the financial markets. Few changes are expected currently from the central banks, which could lead to an increased focus on the economy. After the US economy saw a strong Q3, this is now expected to subside, especially as consumers there are slowly running out of steam.
Following the renewed rise in bond yields to more than five percent, for example in ten-year US government bonds, we now see higher price potential in global government bonds and are strengthening our preference for TIPS in particular. Real yields (based on inflation expectations) are now clearly positive in both the US and Europe. As a result, we are also overweight in bonds overall and are reducing our cash position.