Last week: Markets wait for 9 July US trade tariffs implementation, Oil & Gold price higher, end of month stocks rebalance
WEEKLY TRENDS
Last week, the end of month added to end of Q2 and the end of H1, showed some stocks rebalancing. Since the beginning of the year, stocks diversification was clearly the investors’ motto in H1, demonstrated by EM stocks outperforming US stocks by far (Brazil & Mexico both returning +17% in H1, Poland +30%, Israel +26%, Hungary +25% and South Korea +27%)
Last week, as promised by president Trump, his ‘Big Beautiful Bill’ was passed by the Senate & the House of Rep. (narrowly), leading to spend $7trn a year vs $5trn inflows, hence raising debts (US debt ceiling will be at $41trn this year and expected to be $51trn in 2032)
US NFP job report showed strong figures once again (+147k jobs created in June)
Market investors are now waiting for the 9th July deadline when reciprocal trade barriers pause is expected to end (pressure is on the EU, Japan and South Korea who did not find an accord yet).
MARKETS
Equities
Important weekly performances:
Robinhood (+13%, new tokens on US stocks), Datadog (+17%, will enter the SP500 on July 9), Sabadell (+6%, sold UK TSB to Santander)
Mediobanca (-5%, Mediolanum sold its entire participation in Mediobanca)
Raiffeisen: Staying the course, especially in times of volatility
BNP Asset Management, 1st July 2025
Author: Daniel Dornel, Head of ETF research, global product strategy
Equally weighted equity ETFs have attracted significant investment volumes over the past 12 months, as investors move away from ETFs that track standard stock market indices, which generally assign high weights to stocks with the largest market capitalisation, to the detriment of smaller but still attractive companies. This repositioning reflects investors' growing concerns about the concentration of these indices, which are now dominated by a small number of giants with valuations of several billion dollars. These mega-caps have ultimately dominated major indices such as the S&P 500 and MSCI World, driven by sharp price increases. But this increased concentration carries a significant risk: a simple correction in one or two of these stocks, commonly referred to as the ‘Magnificent 7’, could have a major impact on the entire index.
Looking more closely at the composition of the MSCI World Index, we see that the five largest companies currently account for nearly 20% of the index's capitalisation. Concentration has continued to grow over the past ten years, with the weighting of the top five companies rising from 6% to a record high of 20% at the end of 2024. This has implications for portfolios. There is significant exposure to technology stocks, given the nature of the ‘Magnificent 7’. Over the past ten years, the weighting of the information technology sector in the MSCI World has risen from around 10% to over 25%. Even more strikingly, of the 23 countries represented in the index, US equities account for around 75% of the universe. This weighting has also increased significantly over the past ten years.
Trends observed in early 2025 showed a strong bias towards US and global equities, before US equities experienced capital outflows in February, March and April. Flows into global equities remained steady, while European equities attracted strong interest, making the first quarter of 2025 the most dynamic in terms of flows into European equities, with €24.9 billion. These figures indicate that investors are seeking to diversify away from US mega-caps and, more generally, to reduce their exposure to US equities. Looking at longer-term trends, we are seeing growing interest in equal-weighted strategies.
Applying an equal-weighted approach to the MSCI World universe significantly reduces portfolio concentration. For example, in the MSCI World Equal Weighted Ex-Business Involvement Screens Select Index, the cumulative weight of the top 10 stocks falls from 23% to just 1.4%. From a sector perspective, this approach limits exposure to the technology sector while increasing the relative weight of sectors such as industrials and materials. Weighting companies also results in a more balanced portfolio, with a reduced weighting for the United States (representing less than 40% of the universe in the MSCI World Equal Weighted Ex Business Involvement Screens Select index).
Equal-weighted equity strategies have proven attractive this year: since the beginning of 2025, the MSCI World Equal Weighted Ex Business Involvement Screens Select Index has outperformed the classic MSCI World Index by more than 6.5%. This outperformance can be explained by reduced exposure to the United States and, above all, to the US technology sector, which has underperformed since the start of the year. We believe this highlights the potential advantages of an equal-weighted approach to a global universe: it allows for the construction of a more balanced and diversified portfolio, while maintaining relevant exposure to a major market such as the United States.
UBS Global Wealth Management, 1st july 2025
Author : James Mazeau, Economist, Chief Investment Office
With interest rates at zero in Switzerland, investors need a thoughtful approach to managing liquidity. The key is to match liquidity needs with the right instruments. To do this, we recommend using a strategy that consists of three ‘categories’.
Daily liquidity
This refers to liquidity set aside for daily expenses or obligations due over the next six to twelve months. Flexibility is the top priority, so investors should use current or savings accounts, money market solutions or short-term deposits (up to twelve months). Since the focus here is on immediate access and security, the tools used to manage this form of liquidity should avoid market, credit or currency risk. Returns are likely to be low, but the aim is to ensure that funds are available when needed.
Core and savings liquidity
This covers known expenses or withdrawals over the next one to three years, or funds that may be needed in an emergency. Here, investors may seek a balance between flexibility and return. Potential tools may include diversified exposure to short-duration investment-grade bond funds, both in pounds sterling and other currencies, where appropriate, depending on the investor's personal circumstances (up to two years). For those with future expenses in other currencies, currency solutions may also be of interest. Minimal interest rate, credit or currency risk may be tolerable in exchange for higher returns than pure cash.
Iron reserve and investment liquidity
This category is intended for longer-term needs (up to five years) or funds that are likely to be used only in extreme circumstances. The focus is on maximising returns, with investors potentially willing to accept some price fluctuation and limited liquidity. Investors may use medium-term government or investment-grade bonds and exposure to medium-duration bonds with maturities of two to five years, diversified across countries, sectors and currencies. Moderate interest rate, credit or currency risks may be tolerable in exchange for potentially higher returns, as the opportunity cost of holding cash over longer periods is generally higher.
Swiss companies that pay dividends are attractive, with yields of around 3.2% for the Swiss Market Index, which is above historical averages. A diversified portfolio of such stocks could offer a yield closer to 4%, providing stable income. Covered call writing strategies can further enhance income, potentially increasing yields to 7% per annum. Adding exposure to alternative assets in a well-diversified portfolio can help investors navigate a changing environment, whether through private markets as new sources of return or hedge funds with low correlations to traditional assets to help reduce overall portfolio volatility. However, investors should be aware of the risks associated with investing in alternative assets. With interest rates falling, Swiss real estate may offer opportunities. Lower mortgage rates could make buying an apartment cheaper than renting. In mid-2023, owning a home in Switzerland meant 15% higher running costs than renting, but this is expected to shift to a 15% discount by the end of 2025. The potential for appreciation in multi-family homes, particularly in prime locations, is likely to increase, as these investments typically offer a relatively stable risk premium compared to bond yields.
Raiffeisen, 1st July 2025
Author: Yvan Roduit, Investment Advisor
To ensure the long-term success of your investments, it is essential to stick to your defined strategy.
In the first half of the year, financial markets weathered geopolitical challenges. Despite wars and US trade policy, almost all asset classes posted positive returns in Swiss francs. This development is surprising, but the bottom line for the first half of the year is that, despite the turbulence, sticking to the chosen investment strategy pays off.
The first half of the year was marked by political uncertainty. The erratic customs policy pursued by the United States, the ongoing war in Ukraine and, more recently, the escalation in the Middle East, led to spikes in volatility. Stock markets fluctuated sharply as a result. Looking more closely at ‘reciprocal’ customs duties, the 90-day negotiation period will expire on 9 July. Apart from the United Kingdom and China, the United States has not announced any significant progress. The window of opportunity for trade agreements is narrowing. What will happen next remains unclear. It is possible that the deadlines will be extended again, but it is also possible that the White House will decide to unilaterally raise customs barriers. In any case, everyone will have to deal with this geopolitical instability in the years to come.
For the second half of the year, the outlook for financial market volatility remains high. In addition, due to the Swiss National Bank's monetary easing policy, investors are struggling to find attractive fixed-income investments. Initially planned investments have now been put on hold and major consumer spending has been postponed. As a result, there are increasing signs of a slowdown in global economic growth. The US economy, in particular, is expected to lose significant momentum this year. The world's largest economy is thus threatened with stagflation. This situation is once again uncomfortable for the US Federal Reserve (Fed), which is currently ruling out sharp interest rate cuts. In the eurozone and Switzerland, average annual growth in real gross domestic product is expected to be close to 1%.
Despite the current uncertainties, the first half of the year has already shown impressively that investors should not allow themselves to be unsettled. In such a context, a broadly diversified portfolio and a well-thought-out weighting of asset classes are essential. Furthermore, an active, countercyclical investment strategy allows opportunities to be exploited in a targeted manner.
However, in order to stay on course when uncertainty is high, sticking to your investment strategy makes all the difference. Finally, there is one more point that should not be overlooked, and it is an important one: volatility is also a source of opportunity.
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