Tareno View January 2025

The main drivers of this develo­p­ment are US techno­logy stocks. High price gains have increased the weighting of the seven largest techno­logy stocks (Apple, Micro­soft, Amazon, Alphabet, Tesla, Meta and Nvidia) to 32% of the US equity market and 22% of the world equity index. This means that index investors and investors who align their equity portfo­lios closely with the world equity index are consciously or uncon­sciously assuming a growing cluster risk in the major US techno­logy stocks. Follo­wing the signi­fi­cant valua­tion expan­sion of recent years, these stocks have a diminis­hing upside poten­tial and an incre­a­sing poten­tial for disap­point­ment.

With such a high portfolio concen­tra­tion on a small number of stocks with the same perfor­mance and a signi­fi­cantly lower risk/return ratio, it is advisable to realise some of the gains and diver­sify into other market segments.

This is where US mid-caps come in, as they are valued much more modera­tely and are more strongly geared towards the domestic market, which means they benefit in parti­cular from the favourable condi­tions in the United States.

Let us be clear about this: US techno­logy stocks remain a central element of the portfolio due to their profi­ta­bi­lity and long-term growth. However, we clearly question whether it needs to be a quarter of the portfolio for risk/return reasons.

Positive signs for 2025, but…

In view of rising corpo­rate profits, falling interest rates and moderate valua­tions outside the US, we continue to see good oppor­tu­ni­ties for attrac­tive equity returns, especi­ally if European industry emerges from its two-year contrac­tion phase. However, this positive outlook is clouded by a number of uncer­tain­ties. A protec­tionist US policy under Presi­dent Trump, incre­a­sing concerns about sovereign debt or geopo­li­tical escala­tions could become negative factors for the stock markets.

Invest­ment policy

Tracking down yield poten­tial

Investors are able to look back on another successful year: Equities and bonds achieved above-average returns for the second year in a row. Gold and Bitcoin made parti­cu­larly strong gains, contri­bu­ting notice­ably to the returns in our portfo­lios.

However, high returns in the past also have an unplea­sant side effect: they reduce the return expec­ta­tions for the future. After two very profi­table years, it will be diffi­cult to repeat the above-average returns of recent years in the coming years. Nevert­heless, we continue to see considerable poten­tial for returns in various asset classes and market segments. Active and disci­plined portfolio construc­tion is there­fore becoming incre­a­singly important. In our view, the follo­wing compon­ents are parti­cu­larly attrac­tive:

Swiss quality

Swiss equities are attrac­tively valued by histo­rical standards and relative to other asset classes. At 3.1%, the dividend yield is signi­fi­cantly higher than the bond yield of 0.7%. We see great poten­tial in defen­sive heavy­weights, infras­truc­ture compa­nies and fast-growing mid-caps.

Profi­table growth markets

The impres­sive perfor­mance of the major US techno­logy stocks highlights the poten­tial of compa­nies that benefit from struc­tural growth and operate in markets with high entry barriers. These charac­te­ri­stics are parti­cu­larly noticeable in compa­nies from the cyber security, artifi­cial intel­li­gence, water and energy infras­truc­ture sectors.

Private market invest­ments

Private equity, private debt, infras­truc­ture and property offer attrac­tive returns and diver­si­fi­ca­tion oppor­tu­ni­ties. The growing number of evergreen funds facili­tates access for private investors.

Portfolio protec­tion with poten­tial

Gold and Bitcoin remain attrac­tive despite sharp price rises. In view of geopo­li­tical tensions and infla­tion risks, we expect demand and prices to continue to rise.