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St. Galler Kantonalbank hosted an event focusing on the regional economy, the EU, and the USA, featuring insights from experts on the automotive industry and investment strategies. Dominik Schmidlin highlighted a mixed economic outlook for Eastern Switzerland, with stable domestic markets but weak foreign demand, particularly from southern Germany. Meanwhile, Thomas Stucki noted that the global economy is expected to grow unevenly, with the USA continuing as a growth engine despite Germany's decline.
Economic experts highlighted a mixed economic landscape in Eastern Switzerland, with a stable domestic market contrasted by a weakening industrial sector due to low foreign demand. While optimism remains cautious, the region's recovery is hindered by ongoing global economic challenges, particularly in Europe. The automotive industry is undergoing significant transformation, driven by new technologies and market conditions, necessitating shifts in business models and skills.
The Swiss stock market is currently appealing due to conservative stocks in the pharmaceutical and food sectors, as investors seek defensive positions amid rising market volatility. The impact of renewed trade disputes remains uncertain, but large companies are better equipped to navigate potential tariffs compared to SMEs. The Swiss National Bank will closely monitor the franc's status as a safe haven, adjusting its policies as necessary.
Negative interest rates in Switzerland are deemed unlikely, as the Swiss National Bank (SNB) aims to avoid them despite external pressures from the European Central Bank. With low inflation and a stable domestic economy, there is no current crisis necessitating such measures, and existing low rates are already inflating the real estate market. The SNB's focus remains on managing monetary conditions without resorting to negative rates.
The US stock markets have shown resilience amid Donald Trump's presidency, with rising prices despite high interest rates, particularly a 7% mortgage rate. Inflation, driven mainly by service price increases, stands at 2.9%, but a significant surge is not anticipated, allowing the Fed to consider potential interest rate cuts later in the year. Long-term inflation expectations remain stable, with "sticky inflation" at 2.9%, suggesting manageable inflationary pressures ahead.
The era of negative interest rates has shifted, but the search for yield continues as investors seek alternatives amid low returns on traditional bonds. With rising interest rates unlikely for a few years, many are turning to equities, real estate funds, and even cryptocurrencies, despite the associated risks. A well-diversified equity portfolio remains a prudent strategy for those looking to navigate this low-interest environment effectively.
Falling interest rates and high demand are driving up real estate prices in the St.Gallen region, with condominium prices rising by 2.7% in 2024 and further increases expected in 2025. However, structural issues in the housing market, including insufficient construction and regulatory challenges, pose long-term risks.
France's financial situation is under scrutiny as its debt reaches EUR 2,450 billion, with a rising risk premium on government bonds. Despite a budget deficit of 5.5% of GDP and a debt-to-GDP ratio of 112%, debt financing remains manageable, with interest expenses at 2.3% of GDP. The intense focus on France's debt reflects broader concerns about the eurozone's stability and the European Central Bank's role in maintaining investor confidence.
The Swiss National Bank (SNB) is expected to cut its key interest rate by 0.25% amid strong market speculation, with a 50% chance of a larger 0.50% cut. This move aims to weaken the Swiss franc, which remains strong due to global uncertainties. The SNB should adopt a less predictable approach to its monetary policy to avoid market disruptions.
At the St. Galler Kantonalbank investment forum, financial experts expressed a "cautiously optimistic" outlook for the economy in 2025, highlighting a potential decline in interest rates that could favor equities over bonds. While the US economy shows promise, the European market is weakening, particularly in France and Germany, though Switzerland's tourism sector remains strong. The discussion also emphasized the value of "hidden champions" in niche markets, such as Accelleron Industries, and addressed audience inquiries about silver's volatility compared to gold and the challenges in valuing Stadler shares.
Thomas Stucki
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