class = “sc-cffd1e67-0 fmXrkB”>
Mr. Geissbühler, where will the Swiss Market Index (SMI) be at the end of the year?
Matthias Geissbühler: We do not have a specific target in terms of score for SMI. But this much may emerge: It will be volatile and we will see lower index levels in the meantime. Including dividends, I believe SMI will achieve a 6 percent increase over the year. That’s a pretty average figure, but it’s a solid performance. Defensive stocks such as Nestlé, Novartis and Roche are likely to be the main contributors. We assume other exchanges will also do worse than SMI.
This year you’re betting on Swiss stocks, gold and property funds. For example, how do you turn the 100,000 francs you will receive from an inheritance into an investment in 10 years?
In this time frame, I would definitely bet 50 to 60 percent on Swiss stocks depending on risk capacity – especially since defensive Swiss stocks had a tough time last year. Roche attracted attention with double-digit price losses, Lonza lost a lot of value, and Nestlé could not recover either. Pharmaceutical stocks like Novartis and defensive consumer goods stock Nestlé are now cheaply valued and belong in every portfolio. Real estate funds with a five to six percent weighting are a good addition as bond substitutes thanks to their attractive distribution yield. They are also suitable for young investors who do not own their own home and want to participate in the medium and long-term appreciation of the Swiss real estate market.
Why do you recommend gold that does not generate any income such as dividends or interest payments?
The yellow precious metal is used as a hedge or crisis hedge that helps smooth volatility. We assume that opportunity costs, that is, interest rates, will decrease from the second half of the year. This could put gold prices on the brink of rising after consolidating between $1,600 and $2,100 per ounce over the past three years. We recommend that you keep a 7 percent gold share in your portfolio. I would hold the fund, which remains around 27 percent after 60 percent in stocks, 5 to 6 percent in real estate funds, and 7 percent in Swiss franc bonds for investment purposes in the form of shorter-term gold and money market funds. Liquidity cushion to be flexible to react in the future. Of course, 2024 will bring with it significant fluctuations. This opens the door to new investment opportunities.
It’s almost impossible to hit bottom when buying. So does it always make sense to invest in stages or tranches?
There is no silver bullet. Some studies say timing is difficult because markets have been rising steadily over a longer period of time. Accordingly, the advice is to buy everything at once. Other strategists advocate waiting for a major correction so that they can use it to enter later. This might make sense, but you could wait a decade because there is no significant correction or the investor missed it because they were on vacation. Therefore, the pragmatic way is to start gradually. Especially if you haven’t invested yet. On the other hand, anyone who has already invested needs to deposit new money regularly so that their purchase price can adjust.
Does the price fluctuation or volatility you expect affect all asset classes?
Even if 2023 is an exception with very high fluctuations in interest markets and relatively low fluctuations in stock markets, volatility will generally remain high. We expect higher volatility in both investment categories this year due to the uncertain economic environment. This will likely lead to too much sector rotation, causing prices to fluctuate more. It is not yet known when central banks will start reducing interest rates. It is also unclear how much interest rates will drop. These uncertainties will lead to large fluctuations in financial markets.
On the Swiss stock market, investors can use ETFs to bet on SMI, SLI, SMIM or SPI. Which is best for investment?
The broad Swiss Performance Index (SPI) basically presents itself. Investors are therefore quite diversified but still have a good share of the heavyweights Nestlé, Novartis and Roche. We assume that defensive stocks will be ahead this year and hence SPI and SMI will perform well. As we look ahead to the second half of the year, it can be exciting to think about getting involved with SMIM. At some point in the summer, central banks will start lowering interest rates. It’s a good time to buy cyclical stocks that are well represented on SMIM.
What do you think about Swiss bond investments?
Active management is especially important when it comes to bonds. Last year we achieved a distribution yield of 2.5 percent or more on the Swiss Bond Index (BBB). We increased bonds accordingly, but reduced risk again after yields fell significantly in the last few weeks. Yields are currently around 1.5 percent and therefore at the current level of inflation. This means that the attractiveness of these systems is decreasing again. I can preserve capital, but I can’t actually make money from it. However, if interest rates rise again, Swiss franc bonds could become an interesting option again.
The return on real estate funds is currently just over 2 percent. Does this seem low compared to stocks?
We expect the distribution returns of real estate funds to increase from two percent to three percent due to the increase in rental income. In addition to generating more cash flow, these funds should also benefit from falling interest rates because their net asset values can be discounted more deeply again. We do not expect major price increases in real estate valuations. But recently premiums have fallen sharply and many negatives have already been priced in.
Warren Buffett joined Coca-Cola 45 years ago and achieved extremely high performance. What are your three Swiss stocks with Warren Buffett characteristics?
Like Warren Buffett, I used to invest in stocks that produce products for daily needs. New changes in technology stocks can happen very quickly, often resulting in high price fluctuations. That’s why defensive consumer goods stocks like Nestlé should definitely be included in a portfolio, even if the company may not achieve double-digit growth rates due to its size. The business is stable and has high margins. As people get older, Novartis also joins the portfolio. Sika is a pearl in the industrial sector because the company has achieved impressive success in achieving solid added value in recent years. The company is very well run and should provide satisfaction for the next 20-30 years.
Matthias Geissbühler is head of investment at Raiffeisen Switzerland.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
