Review & Outlook
October 25
Dear Sirs
As already noted in our previous quarterly reports, we regret to observe that the
global geopolitical situation continues to deteriorate. In particular, Europe and
NATO are not yet prepared to sit down at the negotiating table with Russia to
finally find a peaceful solution.
The question of how the enormous military spending agreed in Europe is to be
financed is becoming increasingly pressing. Political chaos reigns in Europe’s most
important countries – in Germany in particular, politics is being conducted in defiance of the clear will of the people. In this environment, the economy is weakening noticeably as urgently needed investments fail to materialise.
Although the US economy significantly exceeded expectations in the last quarter,
this was almost exclusively due to enormous investments in artificial intelligence
projects. Without this contribution, economic growth would have been clearly
negative. Recessionary trends are particularly evident in the American labour market, where numerous jobs have been cut since the beginning of the year. Accordingly, consumer sentiment is also at historic lows.
The US currency has lost significant value since the beginning of the year and is
currently down around 12 per cent against the Swiss franc. There are many reasons for this development, but the main factor is the spiralling national debt in the US. The share of debt interest in government spending now significantly exceeds defence spending, and a sustainable reduction of the debt burden using conventional means appears increasingly hopeless.
For several days now, the American government has been partially paralysed because parliament has not yet been able to reach agreement on a new budget. The fact is that the US is unlikely to declare formal bankruptcy, but will instead attempt to solve the problem through a steady devaluation of the US dollar – which will also devalue the debt in real terms.
Central banks around the world recognised this development early on and shifted their currency reserves accordingly. However, as many Western countries are facing similar debt problems, numerous central banks have been investing heavily in physical gold for years. In the absence of attractive alternatives, this trend is likely to continue in the coming years and continue to support the price of gold.
Despite the overall negative environment described above, the financial markets once again performed surprisingly well in the third quarter. Much of this optimism is based on the hope that artificial intelligence will contribute to a significant increase in corporate profits in the future. However, we remain cautious in this regard, as the current massive investments in this area are unlikely to yield returns for several years and will first have to be amortised.
We will therefore remain cautiously positioned in the coming weeks. At the same time, we continue to focus on broadly diversified investments in solid companies and are maintaining our overweight position in precious metals.
We wish you a few more sunny autumn days.
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