Investing in July: Our forecast in brief

Credit Suisse's perspective on economic and financial Credit Suisse's perspective on economic and financial market developments over the short- to medium-term and their implications for investors. US equities are given more weight, whereas emerging market equities are set to neutral.

Defensive US equities are still favored

We maintain our overweight position in global equities overall. However, due to the escalation of the trade dispute, we are neutralizing our previous overweight in emerging market equities and increasing our weight in US equities, since these should be more stable in the current environment while also enabling participation in the global growth of the IT sector.

In the fixed-income area, we are favoring emerging market debt in hard currency as well as global high-yield bonds. In the remaining asset classes, we are keeping to the long-term strategic weighting. 

Economy: Strong start for the Swiss economy – cautious outlook

The trade disputes and subdued demand for capital goods are having an ever more noticeable impact on global industrial production, especially in Germany and China. However, the global economy should not slide into a recession. Thanks to a healthy labor market and low inflation, purchasing power of households is high around the world; the central banks are supporting the economy and higher government spending is no longer taboo even in Europe.

It's nice to look back: The Swiss economic output was 1.7% above the previous year's value in the first quarter of 2019. However, the outlook is more subdued, especially for the export economy. The Purchasing Managers Index (PMI) for the Swiss industry has fallen to below the growth threshold. The initial position for consumption is looking better: A healthy labor market and immigration are having a supportive effect at the moment. Accordingly, the PMI for the more domestically-focused service sector remains in the growth zone. 


Growth prospects are only positive for the service sector

Source:, Credit Suisse
Last data point: May 2019 

Bonds: Swiss National Bank is holding off on interest rate cuts

Given the expectation that both the US Federal Reserve (Fed) and the European Central Bank (ECB) will lower interest rates this year, it has become more likely that the Swiss National Bank (SNB) will also reduce the key interest rate.

There is still some leeway, as the flight to cash has clearly subsided recently. The SNB is only likely to lower the interest rate if the appreciation pressure on the Swiss franc increased to such an extent that even possible interventions in the foreign exchange market are not able to reduce it. 


Fewer 1000-franc banknotes are in circulation

Year-on-year increase or decrease in the banknotes in circulation, in %
Source: SNB, Credit Suisse
Last data point: March 2019 

Currencies: Uncertainty continues to weigh on the euro and the Swiss franc in the short term

We have a neutral outlook regarding the euro and Swiss franc currency pair. The uncertainties regarding the economy and monetary policy remain, and a possible interest rate reduction by the ECB could weigh on the currency pair.

On the other hand, the recovery of the global economy that we anticipate in the medium term should be especially supportive of the euro against the Swiss franc. The Swiss franc is also already overvalued, which makes further appreciation difficult. Our forecast for the euro and Swiss franc exchange rate is currently 1.13 in three months and 1.17 in one year. 


Economic data should support the euro and Swiss franc currency pair

Source: Datastream, Credit Suisse
Last data point: June 17, 2019

Equities remain attractive worldwide

In May, the worsening trade conflict between the US and China led to temporary sharp declines in the price of equities. However, encouraged by the willingness of central banks to support the global economy, investors regained hope in the first half of June.

In an environment of political tensions and struggling industry, but at the same time expansive central banks, we still see equities as attractive, but are reducing the risk in portfolios – especially at the sector level. We continue to favor IT companies. 


There is still upside potential for equities

Source: Datastream, Credit Suisse

Last data point: June 17, 2019

Commodities: Oil under pressure, focus on OPEC

Commodities remain under pressure due to ongoing economic concerns. After initial robustness, crude oil prices in particular have fallen sharply recently. The market focused largely on rising concerns about demand, while the risk of interruptions in production and logistics remains high.

We believe that the Organization of Petroleum Exporting Countries (OPEC) will react to the recent fall in prices by extending the production cuts, and that the market will stabilize again as a result. Gold is currently proving to be a useful means of diversification.


Oil market recovery comes to an abrupt end

Source: Bloomberg, Credit Suisse
Last data point: June 17, 2019 

Real estate: Decline in housing production supports price growth

The production of residential property is steadily declining in Switzerland. This is unlikely to change for a long time. Over the last 12 months, just under 12,500 condominiums have been approved, which is 13% less than in the previous year.

The decline in single-family houses has been just as pronounced (14% less). The supply-side shortage has contributed to residential property prices increasing further. In the first quarter of 2019, a price increase of 3.7% for residential property was observed compared to the previous year. 


Fewer single-family houses and condominiums are planned

Planning of residential property: Number of housing units, moving 12-month sum.
Source: Baublatt, Credit Suisse
Last data point: March 2019 

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