There is still room for growth for the Zurich market

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The Swiss stock exchange made a good recovery compared to the bottom hit during the lockdown. The SMI index fell from a high of 11,270 points reached around mid-February to a low of 7,650 points in the second half of March. Then there was a rapid recovery to current levels of around 10,500 points.

There is still room for growth for the Zurich market
There is still room for growth for the Zurich market - Central bank support is essential for the financial markets. © CdT / Zocchetti

There is still room for growth for the Zurich market

There is still room for growth for the Zurich market - Central bank support is essential for the financial markets. © CdT / Zocchetti

The big question, at this point, is what could happen in the future, with several factors of uncertainty, including the evolution of the pandemic, the duration and strength of the global economic recovery, and the American elections, which are approaching.

We asked two specialists from Ticino their thoughts.

‘We remain cautiously optimistic - notes Filippo Fink, Investment Specialist of the EFG bank - on the trend of the SMI index and the stock markets in general between now and the end of the year. The indices should continue to benefit from the indirect support of the main central banks which have intervened massively with ultra-expansive monetary policies to support the real economy and to avoid deflationary scenarios’.

The role of central banks

During the last meetings of the ECB and the Fed - he specifies - it was reiterated that the expansionary monetary policy measures will remain in force for a long time. Indeed, the American central bank has revised the historical inflation target of 2% to a variable average of around 2%, leaving the assumption that it will tolerate a growth rate in consumer prices above this threshold’.

‘The interventions of the central banks - he notes - have pushed yields close to zero or even into negative territory, as in the case of bonds in Swiss francs. In a similar context, the investor finds himself in the position of having to take on a higher level of risk and therefore finds himself irremediably investing in shares. The SMI index is also favoured by its defensive characteristics, thanks to its overweighting in the food and pharmaceutical sectors, characterised by constantly growing profits and turnover’.

“Despite the unconditional support of central banks - he concludes - the stock markets could experience setbacks. The disturbing factors to which maximum attention must be paid are in particular the uncertainty generated by the American presidential votes in early November, especially after Trump’s recent recovery in the polls. The evolution of the new coronavirus cases will also be important. In this regard, it is also to be hoped that the markets will not be disappointed by any delay in the development of an effective vaccine. Finally, we should not forget the lack of results so far in the negotiations between the British government and the EU on Brexit. If an agreement is not reached, negative repercussions on the main stock markets cannot be excluded’.

A volatile 2020

The world stock markets - explains Sascha Kever, asset manager of the Lugano PKB - have experienced an extremely volatile 2020, and Switzerland was clearly no exception. To get an idea, just look at the trend of the SMI, which today is practically on the same level as at the end of the year, but passing from + 6% in February and -28% in mid-March ».

Optimistic view

‘Basically - he continues - in our opinion the markets still have potential, but we need to have an adequate time horizon. In the short term, the international agenda presents us with a series of important events, including the American elections, which suggest caution’.

‘In the long term, however - he continues - we believe that the stock markets will still benefit from the joint action of governments and central banks, as well as from dividend yields that clearly exceed the bond equivalent’. ‘The Swiss market - he observes - offers investors a very interesting underlying stability, guaranteed by several large multinationals active in the defensive sector, think of Nestlé, Novartis and Roche. Clearly, the lack of large technology-related companies, which this year are taking advantage of what appears to be a real digital revolution, is taking some of the life out of a period like this; however, we believe that in the long term the regular moments of volatility will tend to mitigate this aspect’.

‘The markets - comments Kever - have adapted relatively quickly to the novelty of the pandemic, trusting the intervention of governments and central banks, and focusing on the recovery (which is underway). Even in the past, if we think of terrorism, the financial crisis and the European crisis, for example, we have seen similar behaviour. As long as governments show they have the pandemic under control and the danger of a new general lockdown will remain very low, it is likely that markets are less sensitive to the virus, also by virtue of expectations for a vaccine’.

©CdT.ch - Riproduzione riservata
Ultime notizie: OnTheSpot
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