CA Indosuez (Switzerland) SA - 2018 Annual Report

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Activity report 2018 CA Indosuez (Switzerland) SA

If you add sky-rocketing volatility to this bleak picture, you can better understand why many portfolio managers have reported disappointing results. Does the poor performance of the financial markets also reflect a struggling global economy? As previously explained, the answer is no. If you look at global growth, which is estimated at 3.4% in real terms for 2018, and given that inflation is generally close to the targets set by the major central banks, the two culprits that probably bear most of the responsibility for the poor results this year are i) competition resulting from the higher interest rates paid on short-term dollar deposits and ii) the presumed capacity of the markets to anticipate large-scale problems. Admittedly, the level of interest rates in US dollars make short-term investments in this currency look fairly attractive. Moreover, the greenback has been buoyed by the interest rate differential and has proven to be the strongest currency in 2018 except for the Japanese yen. Although short-term interest rates in US dollars are undeniably rising, we have a few doubts as to the validity of the second explanation. Neither European uncertainties nor the rise in protectionism are expected to derail the global economy in 2019. Therefore, if our analysis is confirmed, it is too early to sell off risky assets.

Sent to press 25/01/2019.