蘇黎世州銀行24年12月投資更新：更深入觀察中國增長勢(shì)頭

Investment

Update

Formandateclients|December2024

AcloserlookatChina’s

growthmomentum

Upturnwithinthedownturn

Contents

Editorial3

Focustopic4

Economyandfinancialmarkets8

Investmentpolicy10

Positioninginassetclasses12

Investmenttopics14

Sustainabilityandinvestment17

Switzerlandinaglobalcontext18

Questionofthemonth19

Legalinformation20

ZürcherKantonalbankmaybereferredtoasZKB.

PublisherZürcherKantonalbankAuthorsManuelFerreira,SilkeHumbert,MarinaZech,SimonLustenberger,Dr.J?rnSpillmann,EliasHafner,Felix

J?ger,Dr.MartinWeder,Dr.DavidMarmet,ChristianBr?ndli,SaschaJucker,KevinGismondi,RolandoS.Seger,CindyGeisel,AndreasGuntli,Jens

SchweizerEditingRolandoS.Seger,CindyGeisel,AndreasGuntli,SandroMoccettiProofingEvolveAdvertisingAG(Zürich)undZürcherKantonalbank(InvestmentSolutions)ProofreadingLionbridgeSwitzerlandAGPrintingZürcherKantonalbank(Hard)PhotographsGettyImagesPrintrun200

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2InvestmentUpdate12/2024|ZürcherKantonalbank

Editorial

Dearreader

Theelectionisover,butthenewadministrationisn’tgoverningyet.Thingsaren’talwaysasbadastheyseem;inotherwords,althoughweneedtotakeDonaldTrumpseriously,weshouldn’tinterpret

everywordhesaysliterally.Intheend,thiselectionhasresultedinthetrifecta.ThisisasituationinUSpoliticsinwhichthepresidencyandthemajorityinbothchambersofCongress–theSenateand

theHouseofRepresentatives–areheldbythesamepoliticalparty.Moreover,thispartyisin

chargeofnominatingcandidatesforimportantpostsandsettingfederalbudgetprioritiesandisresponsiblefortaxandregulatorypolicies.

Nevertheless,anyonewhobelievesthere-electedpresidentwillbeabletopushthroughhispoliti-calprogrammeoftaxcuts,tariffhikesa

ndderegulationwithoutresistancewou

ldbewrong.Inspiteofthetrifecta,DonaldTrumpislikelytohavetroubleimplementinghisplans.Ontheone

hand,theRepublicanshaveonlyavery

narrowmajorityintheSenateandtheH

ouse.Onthe

other,wecannotforgetthatthereareoftendifferingopinionsandinterestswithinapartyitself.Internalpartydynamicsmeanthat

DonaldTrumpdoesnothaveacarteblanche

butratherwillbeforcedtocompromiseoncertainpostsandissuestosecurethesupportofhisownparty.

Withitssystemsofchecksandbalances,theUShasaninstrumenttoseparatethepowersofgov-ernment.ThisensuresthatnosinglepersonorinstitutionhasunlimitedpowersincethepresidentisoverseenbyCongressandthecourts.Thankstothissystem,thesometimesdivergingpositionswithinthepartyandotherfactors,powerremainslimitedanddivided.

ChristophSchenk

ChiefInvestmentOfficer

InvestmentUpdate12/2024|ZürcherKantonalbank3

Focustopic:AcloserlookatChina’sgrowthmomentum

Upturnwithin

thedownturn

TheChinesegovernmentannouncedaseriesofmeasuresinthepastweeks.However,

expectationsofasweepingfiscalpackagetostimulatetheeconomyhavebeendisappointeduntilnow.Itisnotunreasonabletohopeforanimprovementingrowthmomentum,but

ifthegovernmentdoesnotdoubledownnextyear,thiswillbeanothercyclicalupswingwithinthestructuraldownturn.

ByMarinaZech,SeniorEconomistEmergingMarkets

Weakgrowthatmid-year

Asaresultoftheongoingrealestatecrisis,lacklustreconsumptionandlowpropensitytoinvestinthe

privatesector,China’seconomyhasbeenflaggingforsometime.Thepublicsectorhasachievedbrief

improvements,althoughtheserequiredseriouspolit-icalpressure.Growthinthefirsthalfofthisyear

slowedsignificantly,anditacceleratedonlyslightly

inthethirdquarter.Momentumwasonceagain

clearlybelowpotential,andinautumnthecentralgovernmentbegantorealisethatwithoutcounter-

measuresthisyear’sgrowthtargetofaround5%wouldnotbereached(Chart1).Hence,thecentral

bankcutvariousinterestrates,andbyChinesestan-dardsthemonetarypolicyeasingwassubstantial.

However,duetolowinflation,realinterestratesarestillatarelativelyhighlevel.Furthermore,theprob-

lemisactuallynotalackofcreditsupplybutratherweakdemand.Morefavourableinterestratecon-

ditionsthusprovidebarelyanystimulusinthecurrentenvironment;theymerelykeepthedownsideeco-

nomicrisksincheck.

Chart1:Growthtargetjustreached

RealGDP(yoy)

15.0%

12.5%10.0%7.5%5.0%2.5%0.0%

20002005201020152020

ZKBforecastRealGDPgrowth(yoy)

◆Government'sgrowthtarget

Sources:ZürcherKantonalbank,CapitalEconomics,Refinitiv

Smallconsumptionstimulus

Thus,inautumnexpectationsofawide-rangingfiscalpackagesurged.Withsomethingofadelay,the

leadershipthenannouncedvariousfiscalpolicymea-suresinmid-OctoberandthebeginningofNovem-

ber.Ontheonehand,low-incomegroupssuchasstu-dentswillreceivefinancialsupport.Ontheother,

thegovernmentispromotingtrade-inprogrammesforcertaingoodsandaprogrammeformodernising

industrialplants.Thoseexpectingcomprehensivecon-sumptionstimulusmeasureswerenevertheless

bitterlydisappointed.Thegovernmenthasalways

struggledwithdemand-sideincentives.Despite

persistentspeculation,itappearsthattheChinesegovernment’stoolboxstilldoesnotincludecash

paymentstobroadswathesofthepopulation,liketheonesdistributedintheUSduringthepandem-

ic,forexample.Thetrade-inprogramme,whichamongotherthingsismeanttostimulatenewcarsales,

actuallysupportsthesupplysideaswell.Inconnec-tionwiththis,thereisalivelydebateaboutthehigh

savingsrateofChinesehouseholds,whichataround30%isextremelyhighininternationalcomparison.Ifalmostone-thirdofthecashpayoutswerestashedaway,themultipliereffectofthistypeofstimulus

wouldbeminimal.Becauseconsumerconfidenceisbarelyabovethehistoricallow,thecostsofan

equivalentfiscalpackagewouldbedisproportion-atelyhigh.

Focusondebtmanagement

Whileremainingmostlyvagueaboutthescopeof

theselectiveconsumptionstimulusmeasures,thegovernmentprovidedmoreconcreteinformation

aboutdebtmanagement,assigningitahighpriorityinviewofthemountainofdebtthathasbuiltup.

Inpastyears,localgovernmentsaccumulatedsub-stantialoff-balancesheetdebtviaso-calledlocal

governmentfinancingvehicles.Localgovernments

willnewlybeallowedtoissueatotalofRMB10

trillioninspecialbondsforadebtswaptotransferthishiddendebttotheofficialbalancesheet.This

allowsthemtosaveonsomeinterestpayments.TheMinistryofFinanceputthesedebtsatRMB14.3

trillionattheendof2023,whichamountsto11%ofgrossdomesticproduct(GDP).However,thereis

disagreementabouttherealnumber.AccordingtotheInternationalMonetaryFund,thefigureisRMB60trillion,i.e.48%ofGDPandsignificantlyhigherthantheofficialestimates.Thus,thelatestmeasurehashardlyresolvedtheproblem,butthegovernmentistakingafirststepintherightdirectiontomitigatemacroeconomicrisks.

Pent-upfiscalspending

China’sgovernmentalsoannounceditsintentiontofullyspendthebudgetfor2024thatwasapprovedatthebeginningoftheyear.Localgovernmentshave

increasinglyreinedintheirexpendituresoverthecourseoftheyearbecause,inthewakeoftheongoing

realestatecrisis,reducedincomefromlandsalesandlowerthanexpectedtaxrevenuesledtoashortfall

InvestmentUpdate12/2024|ZürcherKantonalbank5

Focustopic:AcloserlookatChina’sgrowthmomentum

intheiraccounts.Limitedabilitytolevytaxesatthelocallevelhaslongbeenthesubjectofdiscussion.

Localgovernmentspreviouslygeneratedalargepartoftheirrevenuesbysellingland.Inlightofdevelop-

mentsontherealestatemarket,alternativesourcesofincomeareurgentlyneededinthelongterm.

Forthisyear,Beijingisnowallowinglocalgovern-mentstoissueadditionalbondstocoverthedeficit

soastobeabletofullyallocatetheplannedresourcesbytheendofDecember.Theexpectedspending

willnotresultinanyincreaseinthebudgetandthusdoesnotconstitutefiscalstimulusintheclassic

sense.Theoutstandingexpendituresareneverthelesshighenoughtofurtherstimulategrowthuntilthe

endoftheyear.Thus,thegrowthtargetfor2024shouldonceagainjustbereached.

Government-fuelledinvestment

Thepublicsectorhasbeenproppingupgrowthforsometimealready.Currently,publicinvestmentisstillgrowingbyaround6%,althoughsuitableprojects

arebecomingincreasinglydifficulttofind.Withoutpoliticalpressure,certaininvestmentswithlow

expectedreturnswouldhardlybemade,whichin-evitablycausesmacroeconomicproductivityto

deteriorate.Privateinvestmentactivity,ontheotherhand,hasbeenstagnatingforseveralquarters

(Chart2).Ifthegovernmentdoesnotdoubledownintheyearahead,theeconomicupturnwilldecel-

erate.Therefore,wepredictthateconomicmomentumwillslowagainalreadyatthemiddleoftheyear.

Realestatemarketactsasabrake

Thereisalsostillnoquicksolutiontothehard-hitrealestatemarket.Variouspropertydevelopersface

liquidityproblems,manyconstructionprojectshavebeenhaltedandtheconfidenceofthepeoplein

thesectorhaseroded.BecauseinChinahousingunitsareoftensoldbeforeconstructionbegins,doubt

aboutwhethertheywillbecompletedifadeveloperdefaultshascauseddemandforrealestatetocol-

lapse.Althoughgovernmentcontrolmeasureshavepreventedabiggerslumpinprices,thebreadthof

thepricecorrectionisnowcomparabletothatin2015(Chart3).

Reductioninexcessrealestateinventory

InMayofthisyear,thegovernmentthuslaunchedaprogrammetoreducetheexcessrealestate

inventory.State-ownedenterpriseswereabletobuypropertiesforsocialhousing.However,agreeingonapricewithpropertydeveloperswasdifficult,espe-ciallybecausesocialhousingislessprofitablethanrentalsatmarketprices.Propertydeveloperswerereluctanttograntthegovernment-mandatedpricediscount,andthustheprogrammebarelygainedtraction.Newly,localgovernmentsareallowedtousespecifiedfundstobuylandandrealestate,butaslongasthecentralgovernmentisnotprepared

toprovidecompensationfortheadditionalpricedis-count,itwouldbeunrealistictoexpectlivelypar-

ticipation.Hence,therealestatesectorrestructuringwilldragonforyearsyet.

Chart2:Privateinvestmentisstagnating

Fixedassetinvestment(ytd,yoy)

Chart3:Breadthofpricecorrectioncomparableto2015

Residentialrealestateprices(newconstruction,monthlychangein70largestcities)

25%20%15%10% 5% 0% -5%-10%-15%

70

60

50

40

30

20

10

201320152017201920212023

0

2011201320152017201920212023

PublicPrivate

PriceincreaseStagnationPricedecline

Sources:ZürcherKantonalbank,Refinitiv

Sources:ZürcherKantonalbank,Refinitiv

6InvestmentUpdate12/2024|ZürcherKantonalbank

Emergingindustries

Dependingontheinclusionofupstreamanddown-streamsectors,duringpeakperiodstherealestatesectorgeneratedaround20%to30%ofgross

domesticproduct.Despitepotentialrestructuring,thislevelisunlikelytobematchedagain.Demo-

graphicdevelopmentandthenowhighurbanisationrateargueagainstgreaterdemandforadditional

livingspace.Therealestatesectorwillcontinuetocontributelesstogrowthinfuture.Hence,wepre-dictthePeople’sRepublicwillexperienceastructuralslowdowningrowthlastingseveralyears.Intime,

emergingindustrieswill,ifnotentirelythenatleastpartially,compensateforthegrowthcontribution

fromtherealestatesector.Chinawasabletoposi-tionitselfastheworld’sworkbenchinthe2000s

thankstoitsyoung,rapidlygrowingpopulationandlowwages.Meanwhile,itsworkingagepopulationisshrinking,andasaresultoftheriseinwages,thenationhasbecomelesscompetitive(Chart4).Chinanownolongeronlyproducessimple,cheapgoods;italsomanufacturescomplexproductsinpromising

sectorssuchassyntheticbiologyorgreentechnolo-gies.However,anagingpopulationandhigher

wagesareforcingthemanufacturingindustrytomovefurtherupthevaluechain.Strategicgrowthsectorsalsoprofitfromthegovernment’spolicyofself-reliance.

Escalatingtradedisputes

Inthepast,stronggovernmentpromotionofspecific

sectorsalreadyresultedinasharpincreaseinoutputthatdomesticdemandwasunabletoabsorb.This

excesssupplyhasalwaysbeenexportedtotherestoftheworldandresultsinbilateralimbalances.Re-

centlyChina’s“newthree”industrieshavebecomethefocusofattention.Inthepasttwoyears,the

shareofexportsofelectricvehicles,lithium-ionbat-teriesandphotovoltaicproductshasdoubled.Both

theUSandtheEuropeanUnionhaveraisedexistingtariffssubstantiallytoprotecttheirdomesticindus-tries.Thankstoitsmuchlowerwagelevelcomparedwithindustrialisednations,China’smanufacturing

costsaresignificantlylower(Chart4).Therefore,Chi-neseexporterscanremaincompetitiveinthese

salesmarketsbyreducingtheirmarginsandcanatleastpartlyoffsetanydeclineindemand.

Globalpressure

AnewroundinthetradewarwiththeUSisnow

onlyaquestionoftimesinceDonaldTrumpwas

re-elected.Highertariffswillhurt,butinthelonger

termexportrestrictionsonUSdual-usegoods(with

militaryandcivilianapplications)willtendtohavea

biggerimpact.Thisisbecause,ontheonehand,

Chinawillnothavethecomponentsitneedstoman-ufacturegoodsand,ontheother,theknowledge

transferwillstall,whichwillfurtherreducetheproduc-tivityofChineseindustry.Suchdevelopmentsdonot

preventChina’sindustrialprogress,buttheycauseittoslowdownnoticeably.Therefore,intheyears

tocome,headwindsathomeandfromabroadwillhardlysubside.

Chart4:Highwagesinglobalcomparison

AveragehourlywageinmanufacturingsectorcomparedwithChina(USD,nominal,2022)

SwitzerlandUS

CanadaUnitedKingdom

Portugal ChileArgentina China* Brazil Turkey Thailand Mexico PeruColombiaPhilippines IndonesiaIndia

01234567891011

*EstimatebasedonmonthlywageSources:ZürcherKantonalbank,ILO

InvestmentUpdate12/2024|ZürcherKantonalbank7

Overviewoffinancialmarkets

EconomyandFinancialMarkets

ByTeamInvestmentStrategy&EconomicResearch

DonaldTrump’sre-electionisaccompaniedbyanumberofpoliticalchangesanduncertainties,buttheshort-termoutlookofsustainedgrowth,moderateinflationandfallingpolicyratesre-

mainsintact.

NewUSgovernmenthasclearpriorities

Afteraturbulentelectioncampaign,DonaldTrumpisreturningtotheWhiteHouse.Hisre-electioncanbedescribedashistoric.AfterGroverCleveland(1893),TrumpisonlythesecondpersoninUShistorytoservetwonon-consecutivetermsaspresident.Furthermore,RepublicansnowhaveanarrowmajorityinboththeHouseofRepresentativesandtheSenate.Thenext

twoyearscouldthereforeseeasignificantturnaroundinmanypolicyareas,especiallyasTrump’spriorities

areclear:higherimporttariffs,lowertaxes,lessimmi-grationandreducedregulation.However,itisunclearhowmanyoftheseelectionpromisescanactuallybeimplementedandinwhattimeframe.

Lowergrowthandhigherinflationexpected

DespitethenewUSadministrationandtheforeseea-blechangeofcourse,wehaveleftoureconomicandinflationforecastsunalteredforthetimebeing.We

continuetoexpectrobustgrowth,moderateinflationandfallingkeyinterestrates.Asboththescopeofthemeasuresandthetimeframearestilluncertain,it

wouldbeirresponsibletospeculateabouttheexact

impactatthisstagealready.However,theimmediatemacroeconomiceffectsoftheUSelectionsaremini-malanyway,andtheUSeconomyremainsinrobust

shape.Inthemediumterm,DonaldTrump’selectionprogrammeislikelytoleadtoweakereconomic

growthandhigherinflationduetonewtradedisputesandtheassociateduncertainty.Itshouldalsobenotedthat,inadditiontothepoliticalchangesintheUS,therestoftheworldwillnotbestandingstill.NewUSim-porttariffswillthereforeverylikelyelicitreactions

fromthemostimportanttradingpartners,whowill

probablytakecountermeasures.Moreover,companiesandprivatehouseholdsarealsolikelytoadapttheir

behaviour.

Newimporttariffswouldweighonglobaltradeingoods

8InvestmentUpdate12/2024|ZürcherKantonalbank

Newtradeconflictsareinevitable

Duringhiselectioncampaign,Trumphadalreadyheldouttheprospectofuniversaltariffsforalltrading

partners.AttheendofNovember,heconfirmedthathisfirstofficialactwouldbetoimpose25%tariffsonallCanadianandMexicanimportsand10%onall

Chinesegoods.AsTrump’sfirstterminofficeshowed,suchthreatsmustbetakenseriously,eveniftheyhadoftenbeenusedasameansofexertingpressureandanegotiatingtacticandwerenotalwaysfullyimple-mented.SweepingUSimporttariffswouldhitthetwoneighbouringcountriesMexicoandCanadaparticu-larlyhard(Chart1).Over70%oftheirgoodsexportswenttotheUSlastyear.Inaddition,someAsian

emergingmarketswouldalsobeparticularlyexposed.AndSwitzerlandwouldbecomparativelybadlyaf-

fectedaswell.TheUSisnowSwitzerland’slargest

salesmarket,withpharmaceuticalproductsaccount-ingforthemajorityoftheexports.Thereisahigh

probabilitythatglobaltradebarrierswillcontinuetoincreaseinthecomingyear,makingfreighttransportmoreinefficientandmoreexpensive.

Diversificationeffectisincreasingagain

Thecombinationofmoderategrowthandinterest

ratecutswillalsoensureaconstructiveenvironmentforequitiesin2025.However,valuationlevelsonthe

globalstockmarkets,andparticularlyintheUS,are

high,andtheassetclassiscompetingwiththelike-

wisehigherbondyields,whicharereflectedinamod-estriskpremium.Hence,corporateearningsdevelop-mentwillbethemaindriverofshareperformance.

Wedonotexpectbondyieldstofallmuchforthe

timebeingduetostickierinflationandfiscalpolicy

pressure.Theanticipatedinterestratecutsarealreadyrealisticallypricedintotoday’syieldlevels.Asinflationexpectationsarewellanchoreddespiteeverything,weanticipateanegativecorrelationbetweenequitiesandbondsagain(Chart2),whichimprovesthediversifica-tioneffectinamixedportfolio.Withintheequityandbondassetclasses,weseeparticularopportunitiesintheincreasingmarketbreadthofthestockmarkets.

Diversificationwithintheregionsandsectorswillbe

decisiveinthiscontext.TheUSmarketwillnotloseitscompetitiveedgeanytimesoon,whileEuropemust

fostermorepositivesentimentsoasnottofallbehind.Chinawillcontinuetoimplementfiscalandmonetarypolicymeasuresselectivelybutwillnotsucceedin

turningthetide.Intermsofbonds,wefavourregionswithhigheryieldsandpotentialforsurprisesasre-

gardsinterestratecuts.TheSwissfrancandUSdollarremainsafehavenassetsintheportfolio–thelatteratleastatthebeginningoftheyear.

Chart1:Switzerlandishighlyexposedduetothepharmaceuticalsector

GoodsexportstotheUSasapercentageofGDP

Mexico Canada Malaysia ThailandSouthKoreaSwitzerland Colombia GermanyJapan

ItayChina India UKFranceBrazilSpainRussia

0%5%10%15%20%25%30%

Chart2:Diversificationbetweenstocksandbondsisback

CorrelationUSpricechanges(rolling90days)

0.6

0.4

0.2

0

-0.2

-0.4

-0.6

2019202020212022202220232024

Sources:ZürcherKantonalbank,RefinitivSources:ZürcherKantonalbank,Refinitiv

InvestmentUpdate12/2024|ZürcherKantonalbank9

Investmentpolicy

Tacticalassetallocation

“Balance”investmentstrategyinCHF(characteristic“Basic”)forclientsdomiciledinSwitzerland

UnderweightedNeutralOverweighted

Cash

Total

Bonds

Total

-1

CHF

-1

-1

EUR

GBP

1

USD

CAD

-1

-1

JPY

1

AUD

1

EmergingMarkets

Equities

Total

1

Switzerland

Eurozone

-1

-1

UnitedKingdom

-1

USA

1

1

1

Canada

1

Japan

Australia

-1

EmergingMarkets

1

Other

Gold

Commodities

SwissRealEstate

Legend??Changetopreviousmonth

Interpretation:Thelong-termstrategicassetallocation(SAA,lightgreybar)representstheneutralpositioningoftheassetclasses.The

monthlytacticalassetallocation(TAA)maydeviatefromtheSAAduetocurrentmarketeventsandgeopolitics.Thedeviationisshownbyoverweightingorunderweighting(bluebars)theindividualassetclasses.Changesinpositioningcomparedtothepreviousmonthare

indicatedbyarrows

10InvestmentUpdate12/2024|ZürcherKantonalbank

DonaldTrumpisfuellingexpectations

?TheUSeconomycontinuestogrowstronglythankstorobustpersonalconsumption,whilehouse-holdsandgovernmentsinEuropeandChinaarepracticingrestraintwhenitcomestospending

money.

?Withaninflationrateataround2%,arestrictivemonetarypolicyisnolongerjustified.Fornow,

Trump’sinflationarypolicyisconjecture.Thus,theFedwillcontinuetocutinterestratesforthetimebeing.

?“Trumponomics”willhelptheUSmarketandtheUSD.OutsidetheUS,thefocusisonthelatenttradeconflictandrelativeeconomicweaknessinEurope.ScepticismaboutUSeconomicreflationleadstoelevatedvolatilityaboveallforUSbondyields.

?InvestorsarestillconfidentabouttheconstructiveeconomicenvironmentanddonotbelievethereisanyfundamentalthreattointerestratenormalisationintheUSandEurope.Wefavourstocksoverbonds.

Bonds

UnitedKingdomhashighriskpremium

Meanwhile,expectationsaboutinterestratecutsbytheBankofEnglandandtheFedhavebeenscaledbacksubstantially.ConcernsaboutthenewUS

government’sinflationaryfiscalpolicyhaveledto

higheryields.Investorsarenowbeingreimbursedfortheuncertaininflationpathwithhigherriskpre-miums.Wecontinuetoconsiderbondsfromthe

UnitedKingdomtobeattractivesincethebudgetdeficitislikelytobelowerthanthatoftheUS.Ex-pectationsofinterestratecutsinSwitzerlandandCanadaarerelativelyhighincomparisonandareadequatelyreflectedinbondprices.Wethereforeremainunderweightinthesemarkets.

Pacificregioncurrenciesareattractive

InvestorsarelikelytofavourtheAustraliandollar

andJapaneseyen.TheinterestratedisadvantageinJapanwillabate,andtheyenstillhasalowvalua-tion.InAustraliathecentralbankwillprobably

continuetowaitwithcuttinginterestratesduetothestronglabourmarket.WeareoverweightinPa-cificbondmarketsforcurrencyconsiderations.In

contrast,rapidpolicyratecutsinCanadaareput-tingpressureontheCanadiandollar.

Equities

USatanadvantage

TheUSdollarisstillprofitingfromrisingrealre-

turnsandbetterthananticipatedeconomicdata.Bothresultinaknock-oneffectinthedirectionofUSassets.TheUSstockmarketispursuingthe

“Trumponomics”narrativeandfluctuatesbetweenhopesofsupply-sidestimulusfortheUSeconomyandfearthatfinancialconditionswillhavetore-

maintightforlongerduetopersistentlyhighinfla-tion.ThenewUSadministration’s“Americafirst”mantracontinuestoargueforabove-averageearn-ingsgrowthforUSequities.Intheirwake,Cana-dianstocksshouldalsoputinagoodperformanceandprofitfromtheBankofCanada’sinterestratecuts.

Europeislaggingbehind

Thelatenttradeconflictandrelativeeconomic

weaknessareaburdenforEurope.Wearethere-forereducingtheEurozoneallocationto“Under-weight”.IntheUnitedKingdom,ourinvestmentisalsobelowthestrategicallocation.However,we

areincreasingthepositionslightlybecauseearningsexpectationsforBritishcompanieshaveimprovedsomewhatandvaluationsarestillatalowlevel.

InvestmentUpdate12/2024|ZürcherKantonalbank11

Positioninginassetclasses

InflationdeterminesCHFbondprices

BySimonLustenberger,HeadInvestmentStrategy

MarketexpectszerointerestrateclimateinSwitzerland

Expectationsregardingthepolicyratesofthe