findependent Market Report

The investment year 2024 was very positive! There was hardly an asset class that didn’t deliver above-average returns. While the renowned Time magazine named the incoming 47th US president, Donald Trump, as Person of the Year, in our opinion, the title of Stock Market of the Year also goes to the USA.

Review

All traditional main asset classes contributed to the positive performance (in CHF):

• Gold +34.5%
• Global Stocks +28.4%
• Swiss Real Estate Funds +16.2%
• Swiss Stocks +5.4%
• CHF Corporate Bonds +5.0%
• Swiss Government Bonds (3-7 years) +3.3%

As a result, every fully invested findependent portfolio achieved a positive return. Moreover, each of our main asset classes clearly surpassed the following two important “minimum thresholds”:

• Inflation of local consumer prices: 1.1% (downward trend)
• Estimated interest rate on Swiss bank accounts: around 0.5% (downward trend)
  
  

The capital gains were mainly achieved in the first three months, with additional increases throughout the rest of the year. In the last quarter, the high returns of Swiss real estate funds stood out, benefiting significantly from falling interest rates.

The groundwork for such generous investment returns was particularly fertile in 2024, with four key points standing out: Firstly, the US economy, the world’s largest economy, grew solidly. Secondly, despite some concerns, none of the major economic regions were significantly impacted by wars. Thirdly, it became apparent that most economic regions had brought the massive inflationary surge caused by the global pandemic under control. This allowed major central banks to implement initial interest rate cuts. Fourthly and finally, the election of Donald Trump as the next US president sparked euphoria in several market segments (crypto, high technology, and USD investments in general). In the USA, Japan, and much of Europe, this contributed to an excellent investor sentiment.

In short, the review is very positive.

Assessment

The past investment year was marked by the spectacular performance of gold and global stocks. Of the six traditional main asset classes listed above, only the return on Swiss stocks lagged behind their long-term average of around 7%.

A look into the history books shows (but unfortunately) that (reasonable) investors should not expect a quick repetition of this performance.

According to records since 1926*, for example, the price of gold (in CHF) has increased by an average of nearly 3% per year. The calendar years in which a return of over 30% was achieved can literally be counted on one hand over the past nearly 100 years.

The same applies to US stocks, which delivered an average return of around 8% per year in CHF over the same period. The return of 35% achieved in the past year was exceptional and resulted from a rare combination of a strengthening US currency, above-average corporate earnings from the largest companies, and a significant increase in overall valuation levels.

How do we handle this?

In a word: soberly. We are pleased with the returns achieved and manage client portfolios according to our investment principles. This meant that in 2024, profits from US stocks were realized in many portfolios, and the freed-up funds were reinvested into asset classes whose weighting was furthest from their target allocation. This “rebalancing process” is essential for long-term investment success and helps keep client portfolios consistently well diversified.

Lessons

One never stops learning. Every investor knows that investing is not an exact science. Every year brings surprises. However, the investment year 2024 confirmed some “certainties”:

1. Investing pays off. Most people want “faster, higher, further.” However, those who invest as shareholders in prospering companies can expect positive returns in the long term, provided the world doesn’t end. History has shown that global stocks deliver a positive return in most years, despite wars, pandemics, and other crises.
2. Staying invested is key. Following one’s gut feeling may often be the right choice in many situations, but when it comes to investing, emotional decisions often turn out to be mistakes. Investors who parted with their investments during the global “market sell-off” in early August (see blog post) have since missed substantial gains.
3. Currency hedging can be (very) expensive. There are three primary risks for investors who wish to hedge against expected currency losses. First, using specific derivatives for this purpose is costly. Second, investors who wish to hedge the exchange rate between the US dollar and the Swiss franc must cover the interest rate differential between the two currencies, which currently costs almost 5% per year! Third, one can be wrong. For example, the USD appreciated against the Swiss franc last year.

Outlook

We remain true to our principles and do not make predictions. They are not worth the paper they are written on. Market prices are determined by the simultaneous actions of countless people, each following their own goals, beliefs, and gut feelings. Predicting this continuously and reliably is simply impossible.

Our recipe is and remains simple: follow the above tips and invest long-term and cost-effectively.