Diversify to make the most of Switzerland’s mixed bag
At the beginning of the year Swiss and US equities were among the most expensive developed markets and the
majority of strategists were positive on European equities. Now, as the market corrects, the relative valuation is still
very similar. Nevertheless, the US sold off from an all-time high while the other markets continued in bear market
territory and most dropped more than the US. The latest sentiment indicators and the IMF growth forecast point
to a global slow-down. In this environment, we prefer US equities to European and Swiss ones.
Based on the Fed’s US GDP forecast we expect US companies will still show strong earnings growth over the
next six months. Swiss equities are a mixed bag. Some large caps are now offering a good entry point, while
selective fallen small- and mid-caps look good value. Computer chip-related Swiss stocks, such as VAT, Comet
or AMS will struggle as the whole sector has built up too much capacity. Given that both US and Swiss markets are
expensive, we recommend diversifying equity portfolios globally. Elsewhere, long-term emerging markets offer
value based on Shiller PE (CAPE). Vietnam, and to a lesser extent, India, are interesting places to deploy money. Asia in general
has a positive outlook but new US tariffs could hold these markets back for a while.
Published on 11.2018 by Ashley Lowe, Journalist, Citywire Switzerland
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