Investing in September: Too soon for equity overweighting
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Investing in September: Our forecast in brief

Credit Suisse gives its perspective on economic and financial market developments over the short to medium term and looks at the implications for investors. The economy is continuing to recover. At the same time, the central banks are maintaining their support through monetary policy. That means that, despite the Delta variant of COVID-19, equities are likely to remain the most appealing asset class. Investors should nonetheless err on the side of caution.

It is still too soon for any equity overweighting

The Delta variant of COVID-19 has slowed the rate of economic growth in some emerging markets. Despite this, the recovery is likely to continue in most industrialized countries thanks to the progress being made on vaccination efforts. Furthermore, we can assume that support through monetary policy will remain in place, which means that equities will remain the most appealing asset class in the medium term. However, it is still too soon for any large-scale overweighting.

Although sentiment is no longer quite as overheated as it was a few weeks ago, and the most recent reporting season was very strong, valuations remain elevated. We therefore recommend thematic investments such as Supertrends.

Economy: Swiss retailing staging a recovery

The global economy is continuing to rally in spite of numerous risks, while the situation in the services sector is increasingly normalizing as a result of steps taken towards opening up again. Consequently, the consumer recovery in the US is still ongoing. Industrial activity is also picking up despite problems with supply chains.

In Switzerland, by contrast, the boom in the do-it-yourself / garden / automotive accessories and leisure categories triggered by the pandemic has persisted into 2021. Meanwhile, the battered clothing and footwear segment has regained at least part of what it lost in turnover last year. At the end of June, the figures were still around 16% short of the previous year's level. This gap is likely to close as life gradually returns to normal. Brick-and-mortar retailing, however, is unlikely to make a full recovery, as the competition from online rivals is simply too great.

Economy: Decline in turnover in clothing segment becoming less pronounced

The clothing segment is regaining some of its lost turnover

Performance of seasonally adjusted nominal turnover in retail trade versus previous year

Sources: GfK, Credit Suisse
Last data point: *Figures for 2021 refer to turnover up to June 2021

Interest rates and bonds: SNB intervenes in foreign exchange market

Bank sight deposits at the Swiss National Bank (SNB) reflect the SNB's interventions in the foreign exchange market aimed at weakening the Swiss franc. Since the start of August, they have once again been increasing by more than CHF 1 billion per week. That makes this level of intervention much smaller than it was at the nadir of the coronavirus crisis. Yet the latest interventions suggest that the SNB has no intention of tolerating any rapid strengthening of the Swiss franc. Because interest rate hikes would make the Swiss franc more attractive, they will remain out of the question for some time yet.

Interest rates and bonds: Sight deposits at the SNB are increasing again

Sight deposits at the SNB increasing again

Weekly changes in sight deposits at the SNB, in CHF billion

Sources: Swiss National Bank (SNB), Credit Suisse
Last data point: August 13, 2021

Currencies: Euro displaying temporary weakness

In the past few months, the euro has lost some ground again relative to the Swiss franc. However, this weakness should be merely temporary. The SNB can be expected to intervene again particularly if the Swiss franc strengthens too much. It is to be assumed that the euro will recover against the Swiss franc again by the end of the year. That is because "safe harbors," such as the Swiss franc, are likely to be less in demand in the course of the economic recovery and general normalization.

Currencies: The euro remains low

The 12-month target for EUR/CHF is 1.12

Sources: Bloomberg, Credit Suisse
Last data point: August 16, 2021

Equities: Recovery in earnings underpins global equities

Equities have maintained their uptrend and reached new highs in many regions. This uptrend has been underpinned by robust growth in earnings and favorable financial conditions. Corporate profits have already returned to pre-pandemic levels, while earnings per share are at record highs. Given the strong earnings growth, valuation metrics, such as the price-earnings ratio, have fallen despite rising prices. The positive trend is likely to continue in the second half of the year.

Equities: Pre-crisis levels reached again

Earnings per share rise above pre-crisis levels

Sources: Refinitiv, Credit Suisse
Last data point: August 2021

Commodities: Nerves on display in commodity trading

Commodity prices remain volatile. The oil market should receive support as the result of a newly arranged compromise made by the Organization of the Petroleum Exporting Countries, but concerns have arisen again recently regarding weaker demand. Precious metals are currently focused primarily on the US Federal Reserve, as well as any announcements of a reduction in support through monetary policy (tapering). Industrial metals appear to be undergoing a period of consolidation, while agricultural prices are particularly volatile at present owing to extreme weather conditions.

Commodities: Commodity prices are currently volatile

Commodity prices are volatile

Sources: Bloomberg, Credit Suisse
Last data point: August 13, 2021

Real estate: High demand and scarce supply in residential property

Residential property is currently enjoying increased interest from prospective buyers as a result of the COVID-19 pandemic. Because supply is short, there has been an upward price trend in recent quarters. Within a year, prices of single-family dwellings and condominiums have risen by 6.3% and 6.8%, respectively. The fact that this growth in prices has not been even higher is probably attributable to the inhibiting effects of the strict regulatory requirements applicable to financing. 

Real estate: Accelerated increase in residential property prices

Accelerated increase in prices for residential property

Medium segment prices; dotted lines: average for 2000–2020

Sources: Wüest Partner, Credit Suisse
Last data point: Q2 2021

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