Investing in November: Our forecast in brief 

Credit Suisse's perspective on economic and financial market developments over the short to medium-term and their implications for investors. US equities are likely to triumph over their Swiss counterparts. Investments in IT and financials could prove lucrative.  

Equities overweight recommended in portfolios 

Our investment strategy remains unchanged from the previous month: An equities overweight in portfolios continues to make sense. This overweight can be implemented in the form of US stocks as well as equities from the IT and financials sectors. At the same time, we remain underweight in Swiss equities. Bond yields are still extremely low for investors with the Swiss franc as their reference currency. A weighting below the strategic allocation is recommended for these investors. In terms of alternative asset classes, a weighting close to the strategic asset allocation continues to be advisable.

Economy: Swiss consumption supported by labor market situation

The recent negotiations between the US and China have brought a fragile ceasefire to the trading front. Whether it lasts or not is uncertain – though obviously desirable. Fact is, stable tariffs lessen the risk of ongoing industrial weakness spreading to other sectors.

On the other hand, Swiss households remain pretty optimistic with regard to the labor market. The latter is actually relatively robust at the moment. The unemployment rate is lower than at any point in the last ten years, while employment growth has only recently begun to show a slight weakening. In addition, the number of job vacancies is at a record high – and therefore supportive to the consumer sector.


Swiss job vacancies at record level 

Index of job vacancies 2Q 2015 = 100

Source: Swiss Federal Statistical Office, Credit Suisse

Last data point: Q2 2019 

Interest rates: SNB extends scope for interest rate cut 

The Swiss National Bank (SNB) left its key interest rate unchanged at -0.75% at its September meeting, but changed the basis for calculating the negative interest rate on sight funds held with the bank.

That means the SNB is likely to be pursuing two objectives: First, the bank is reducing the burden of a negative base rate on banks. Second, the move enables it to increase the scope for further rate cuts. Nonetheless, a rate cut is not expected any time soon.


Reduction in negative rate burden for domestic banks 

Estimated interest payments by domestic banks to SNB per year, CHF billion

Source: Credit Suisse

Last data point: 20.9.2019 

Currencies: US dollar still favored 

The US dollar is likely to remain supported for now and is still the leading currency with the biggest interest rate advantage. At the same time, the US economy continues to look comparatively strong. We are therefore maintaining our positive stance on the US dollar.

As far as the major currencies are concerned we prefer the Japanese yen, US dollar, Norwegian krone and Swiss franc versus the euro and the Canadian dollar. In terms of emerging markets, we feel that the Brazilian real has the brightest outlook.


Low growth in euro zone causes currency weakening 

Source: Datastream, Credit Suisse

Last data point: 14.10.2019 

Equities remain favored at global level 

Geopolitical uncertainties remain omnipresent and are affecting investor sentiment on an almost daily basis. While this political ping-pong represents a very challenging environment for companies, private consumption remains virtually untouched thanks to a healthy labor market and modest wage growth. Combined with persistently accommodative central banks and an attractive risk premium versus bonds, we think global equities remain attractive at a global level.


Relative attractiveness bodes well for equities 

Source: Bloomberg, Credit Suisse

Last data point: 11.10.2019 

Commodities: Continued downside risk for oil prices

The oil market has returned to normal more quickly than expected following the attacks on Saudi oil refineries, with prices having fallen. Indeed with the market heading toward oversupply, prices are likely to continue edging lower in the near term.

To prevent such a scenario, US shale oil production would have to slow further while OPEC would need to extend its production cutbacks – though that will probably only happen once prices are markedly lower. Gold remains in demand against this uncertain economic backdrop.


Crude oil prices are likely to remain under pressure 

Source: Bloomberg, Credit Suisse

Last data point: 14.10.2019 

Real estate: Gap between supply and demand continues 

Switzerland has seen lower immigration since 2015. At the same time, construction activity in the rented housing segment has remained very brisk. The result is a rise in vacancy rates for rental apartments. Immigration recently picked up again slightly, and at the same time fewer new planning applications are being approved.

Nevertheless, given the multitude of planning applications already submitted, a full project pipeline, and continued negative interest rates, the gap between supply and demand is unlikely to be bridged in the near future. 


Construction activity and net immigration from abroad 

Source: Secretary of State for Migration, Baublatt, Credit Suisse

Last data point: 8.2019 

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