Swisscanto: Investment Strategy

Thanks to the intact earnings outlooks of companies, shares are still attractive. The Japanese stock market is becoming more appealing again relative to other markets thanks to its continued ultra-expansive mone-tary policy.

Monetary policy causes volatility
The global economy is in such robust shape that, in addition to the Fed in the US, now other central banks have also started to prepare for or implement a mone-tary policy turnaround. In such phases, the prices of individual asset classes usually respond with bigger fluctuations. If the economy, as is mostly the case, proves to be resistant, the riskier asset classes will con-tinue to see their prices rise. Hence, the global climate continues to favor equities.

Exchange rate earnings in Canadian bonds
While in the euro-zone and the UK “only” the com-munication of the central banks has changed, Cana-da’s central bankers have already taken action with an interest rate hike. This led to a powerful appreciation of the CAD. Given the economic growth, we predict a further move on interest rates in Canada, and hence the currency is likely to continue to strengthen. Cana-dian bonds have therefore become more attractive.

Japanese stocks more interesting again
The Bank of Japan is currently the only internationally important central bank that is sticking in both word and deed to its ultra-expansive monetary policy. This is likely to cause the JPY to weaken and to give Japan’s exporting companies a new boost that should also be reflected on the stock market. Conversely, exporters in the euro-zone face somewhat brisker headwinds because of the stronger euro. The overall surprisingly sound economic trend in the euro-zone nevertheless still leads to expectations of above-average price in-creases.

Commodities profit from global demand
Given the general monetary policy turnaround, which leads to expectations of globally rising government bond yields, and the reduced political risks, we predict that the price of gold will continue to fall. The prices of fuel and industrial metals, on the other hand, should be supported by the global economic upturn.