Swiss asset managers expect stock prices to rise in the first quarter of 2016, despite weaker economic growth in a slew of countries and a drop in the valuation of raw materials.
Swiss asset managers are taking heart from the interest rate increase in the U.S. and the loose monetary policy in the Eurozone. They expect stock prices to markedly increase in the first months of 2016, according to the Aquila Vermögensverwalter Index (AVI), jointly published by Aquila Group and finews.ch. Some 200 asset managers took part in the survey.
For an overview of the latest index.
Rising Equity Prices
The number of asset managers expecting an increase of stock prices has risen significantly from the previous survey. The number of surveyed expecting an increase of the benchmark Swiss Market Index (SMI) rose to 66 percent from 39 percent in the previous survey three months ago.
Only 15 percent of asset managers see stock prices falling, down from 33 percent three months ago.
The EuroStoxx50 benchmark index is likely to profit from the monetary policy of the European Central Bank, with 52 percent of asset managers expecting rising prices in the first quarter of 2016. This compares with 38 percent three months ago. Twenty-three percent of the surveyed forecast a fall of the EuroStoxx50, compared with 35 percent.
S&P 500 Receives Boost
The recent rate increase of the U.S. Federal Reserve also prompted a positive response among the surveyed asset managers. Their opinion about the S&P 500 benchmark in the coming three months is very positive, with 70 percent expecting rising stock prices, compared with 48 percent in the earlier quarter.
Bruno Gisler, chief economist at Aquila Group, in October 2015 predicted a rate increase in December and was spot on. He said at the time: «The U.S. financial markets will react positively.» His analysis evidently is shared by most asset managers in Switzerland.
The survey further shows a 63 percent majority expecting further rising rates for the benchmark 10-year U.S. bonds. For the German bond market conversely, the managers expect rates to drop.
Euro Drop in Medium Term
In Switzerland, the share of those who expect an interest rate increase in the first quarter of 2016 rose to 24 percent from 6 percent.
«The franc is weakening ever since mid-July,» said Gisler. The recent easing of monetary policy in the Eurozone however didn't give the franc a boost as some might have expected.
Appreciation of Dollar
Still, 44 percent of the surveyed expect the euro to weaken versus the franc in the medium term, up from 19 percent. Some 63 percent expect the euro to drop against the dollar, up from 51 percent. The dollar is also likely to appreciate against the franc, with 61 percent of the surveyed expecting such a development, compared with 68 percent in the last survey.
Asset Allocation
The asset managers increased the share of stocks in their portfolios as a consequence of their expectations. Equities now amount to 45 percent (up from 40 percent three months ago), bonds to 26 percent (unchanged) and liquidity to 17 (up from 15 percent) of the portfolios.
A further 10 percent are in alternative investments (down from 11 percent), 5 percent in gold (down from 6 percent) and other precious metals, the survey shows.
The asset managers participating in the survey expect the SMI to be clearly above 9,000 in three months time, gold to cost 1,100 francs an ounce, parity for the dollar/franc and 1.07 francs per euro.
The next Aquila Asset Manager Index will be published in early April 2016.
