Addition of gold to overweight
The gold rally has taken a breather over the past two months, and speculative positions have fallen sharply. We expect structural excess demand and are returning to overweight.
Asset Allocation Update: Against all odds?
The global economy is defying political shocks. This is symbolised by Nvidia's strong quarterly results, which reflect enormous investments in AI. On the other hand, there are trade restrictions, rising public deficits and geopolitical tensions. Important political decisions are due at the beginning of July, which are preventing us from increasing portfolio risks for the time being.
Text: Stefano Zoffoli
What have we adjusted in the portfolios?
The financial markets are primarily concerned with two questions, some of which were answered in June:
- What effect will the trade tariffs and the planned US budget ultimately have on a cooling US economy, an accelerating economy in Europe and a stabilising economy in China?
- How quickly and how sharply will key interest rates be lowered?
The fact is that uncertainty has not caused a halt to investment so far. This is exemplified by the planned 50 per cent year-on-year increase in investment by the five largest cloud providers to USD 325 billion. By way of comparison, the Swiss federal budget provides for total expenditure of CHF 85 billion. Furthermore, US consumption remains stable despite a moderate slowdown in the labour market.
June confirmed that the pace of change among central banks varies greatly, for example between the Swiss National Bank and the Federal Reserve (Fed). Although easing will increase in the coming quarters, particularly in the Anglo-Saxon currency areas (assuming that trade tariffs only marginally fuel inflation), the dominant Fed will not cut interest rates for the first time this year until after the summer.
Overall, positive and negative drivers, such as the decisions on trade tariffs and the budget deficit due at the beginning of July, are offsetting each other. We are therefore keeping our strategic equity allocation unchanged and see opportunities in government bonds from regions with upcoming interest rate cuts (AUD, GBP and emerging markets).
Equities: emerging markets, IT and pharmaceuticals
Our preference for emerging market equities helped in June, thanks in particular to South Korean stocks (+15%, 11% weighting). High IT investment and the economic upturn in China should continue to drive emerging market equities.
The same applies to US IT companies, which we have refocused on since May, partly due to the huge share buybacks. The IT sector also looks convincing in terms of figures, as the Nvidia figures show: revenue up 70% (over 1 year), margins of 60% and profits up 30% to USD 20 billion. In general, the AI boom is gaining momentum. However, the renewed positive sentiment is pushing prices back to ‘priced for perfection’ levels.
The position in the relatively inexpensive pharmaceutical sector acts as a counterweight. Prices are gradually recovering from the exaggerated fears of lower drug prices.
Alternative investments: commodities, real estate and private equity
Commodities have gained around 10% since September thanks to a 25% rise in precious metals. However, there are no driving forces for the other segments. We consider an oil price shock due to Iran's threat to close the Strait of Hormuz unlikely. We are therefore maintaining our underweight position in commodities, but are raising gold back to overweight.
Despite zero interest rates, listed Swiss real estate funds have been trending sideways since February. Comparatively high capital increases of CHF 5 billion have been absorbed so far. Although there are no new drivers, Swiss real estate remains in demand. We are currently maintaining this at the strategic quota. Private equity is supported by high valuations in the listed IT sector and potential megatrends (AI applications, semiconductors, energy) that are still in the development phase.
Our Tactical Asset Allocation EUR in July 2025
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