Swiss stock market is attractive

Cedric Spahr is market strategist at the asset managers Grimaldi & Partners. The former Credt Suisse man still sees, despite the recent turmoil good opportunities for stocks.


Since the beginning of the year the Swiss market as a whole averaged almost a zero performance. Is this is the pace which investors have to reckon with this year?
Cedric Spahr: At the beginning of the year investor sentiment was very overheated. The rapid correction in the stock markets against the end of January has now cooled this optimism. This allows the market – psychologically seen - to rise again. The Swiss stock market remains on the medium term fundamentally and technically attractive.

There is not a lack of drivers for stock prices: In Europe, interest rates are as deep as ever. But the effect of the recent extraordinary monetary policy stimulus is not threatening to evaporate?
Spahr: The monetary and economic framework conditions support a positive stock market performance. The gradual withdrawal of the quantitative monetary policy measures in the United States could already slow the upward pace towards the end of spring. Such measures are partly already priced in by investors.

And in Europe? Must soon intervene the European Central Bank with new, unconventional measures?
Spahr: The problems of the euro zone have not disappeared. The determined line of the Central Bank under Mario Draghi acts credibly, to prevent the resurgence of financial panic. It should make the use of severe financial market gun still unnecessary this year.

What would this mean for the Swiss franc?
Spahr: Despite relative calm in the euro-zone, the demand for Swiss franc remains high. The technical picture speaks for a continuation of the sideways movement between 1.20 and 1.24 francs per euro with a falling tendency towards 1.21.

Good running stock markets such as that of the U.S., however, are not longer cheap. Where can find investors still opportunities in the global equity markets?
Spahr: In the U.S., the Nasdaq should have the best cards despite an estimated price-earnings ratio of 18.8 for 2014. Technology remains an attractive growth sector in a sluggish global economy. Europe is generally in the midfield, while Asian markets except Japan should cause little joy. Markets such as Canada, Australia and India, however, are worth a look.

What other asset classes could also be recommended?
Spahr: bonds with good credit ratings in industrialized countries are recommendable, because 2014 the credit risk is generally likely to remain low. The risk of a moderate increase in the long interest rates remains present, so we don’t recommend investing in bonds with too long maturities. The commodity markets provide an ambiguous picture.

The gold price has recovered significantly. Will it continue to go up?
Spahr: Precious metals are after the bear market in 2013 now a fairly loathed investment category. The money printing will go on in the United States, only at a more leisurely pace. Against this background, gold and silver have the potential to surprise positively in 2014. The ounce of gold is expected to rise by the end of the year over $ 1,500. The gold mining shares are likely to benefit disproportionately from an increase in gold price.

And how should behave investors who are primarily concerned to protect their assets?
Spahr: The hoarding of cash in a bank account currently carries a small risk, but at virtually zero interest rates. A well-diversified bond portfolio provides the best solution for defensive investors. With diversification into euro in the medium term a better return may possibly be achieved, but only if corporate bonds are included in the portfolio. With a long investment horizon, some gold as well as a small allocation to the better stock markets should be included.

Handelzeitung, February 27 2014