Author: Stefan Markus Kremeth

Good Morning Ladies and Gentlemen

”I fear that there is no voluntary return in the history of mankind.”

“The Count” in Robert Musil’s The Man Without Qualities (first edition)

U.S. Federal Reserve

The U.S. Federal Reserve Bank has responded to the recent slowdown in inflation by implementing its first key interest rate cut in over four years. On Wednesday, the Fed reduced the interest rate band by 0.5% to 4.75% to 5%. This significant cut is accompanied by indications from the U.S. central bank of further interest rate reductions this year. While a more relaxed monetary policy was expected, there needed to be more certainty about whether the central bank of the world’s largest economy would opt for this substantial interest rate cut or take a more cautious approach by only reducing interest rates by 0.25%. In last week’s “Stefan’s Weekly,” I anticipated a 0.25% reduction, which was also reflected in future prices at that time.

Why financial markets like interest rate cuts

Rita asked me why I had written in my last “Stefan’s Weekly” that interest rate cuts are great news for financial markets. The reason is, that the recent significant interest rate cut by the US Federal Reserve and the two cuts by the European Central Bank are positive news for the economy. Reduced interest rates translate to lower costs for short-term loans. Investors and economists anticipate that lower interest rates can stimulate economic growth because it becomes more advantageous for individuals and companies to borrow money. Consequently, companies can achieve higher profits, making the economy more resilient. Consumers are likely to increase their spending as lower interest rates make them feel more financially capable of making major purchases or investing in their children’s education. Businesses can also capitalise on lower interest rates by securing more favourable financing for their operations, acquisitions, and expansions, potentially leading to increased future profits and higher share prices. Sectors that offer high dividends and businesses requiring substantial capital stand to benefit the most from lower interest rates. Nevertheless, companies with steady cash flows and strong balance sheets can also gain from more advantageous debt financing.

Next week

The good news is that there is more to come; at least, that is what I think. The Swiss National Bank will probably be the last to cut interest rates this month. Next week, I expect them to lower base rates by 0.25%.

My Thoughts for the Weekend

Ladies and Gentlemen, progress should only be considered meaningful if it contributes to added value and, notably, increased prosperity for the general population. Additionally, the traditional understanding of right and left in politics needs to be re-evaluated, as the population appears much more fragmented in many aspects than it was during the last decades. We may need new parties alongside established ones with new offerings. I often wonder if things are as grim as many people perceive them to be or not as dire as they appear. However, living in Switzerland and working in Liechtenstein certainly influences my thinking and my point of view.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

G

Good Morning Ladies and Gentlemen

”More jargon equals more bullshit, and more bullshit equals more billable hours.”

Phil Elwood

Cut Number 1

As anticipated, the ECB has reduced the deposit rate by 0.25% to 3.5%. This action positively influenced European financial markets, while currency markets remained relatively stable. Following ECB chief Christine Lagarde’s remarks on future interest rate policy, the euro strengthened further. She indicated that the ECB would base its decisions on meeting-to-meeting data and refrain from committing to a specific interest rate trajectory. I am not the biggest ECB fan, but this makes sense to me.

Cut Number 2

The Ministry of Labour announced in Washington Yesterday that initial jobless claims rose by 2,000 to 230,000. Economists had expected an average of 226,000 applications. The previous week’s figure was revised slightly upwards by 1,000 to 228,000. Financial markets pay close attention to jobless claims because they are considered a timely indicator for the US labour market. The US, the labour market plays a vital role in the Fed’s monetary policy decisions. These increases are relatively moderate and, thus, not an indicator of a weakening economy. The Fed’s expected interest rate cut will be added to yesterday’s ECB cut next week. I currently expect a reduction of 0.25%, which is reflected in future prices.

Cut Number 3

Let us examine the Swiss National Bank. The SNB key interest rate currently stands at 1.25%, effective 21 June 2024. In Switzerland, there has been a consistent decline in inflation over the past few months. In August 2024, consumer prices in Switzerland rose by 1.1% compared to last year, remaining unchanged from July. In December 2023, the Swiss inflation rate was recorded at 1.7%. There is a strong possibility that Thomas Jordan, the President of the board of directors, will lower the base rate at his final policy meeting before retiring at the end of September.

Financial markets like interest rate cuts

In general, a decrease in interest rates, known as interest rate cuts, creates a more favourable environment for stocks. The question is, of course, to what extent the markets have already factored this into their pricing.

What is a high-quality company?

I am often asked what a high-quality company is and how I go about choosing companies to invest in. Well, Ladies and Gentlemen, defining a high-quality company is complex. Quality encompasses many factors that should be evaluated from a long-term perspective spanning several years. Profitability is critical; the company must consistently generate profits to cover costs and facilitate sustainable long-term growth. Strong innovation, a solid market position, and competitive pricing contribute to robust profitability. Quality companies are distinguished by their ability to achieve sustainable development. It’s vital to balance investing in expansion and nurturing existing business areas. Excessive growth can strain a company’s financial reserves, so prudent financial management is essential. A solid balance sheet is another hallmark of a quality company. Managing growth to maintain a healthy balance sheet is critical to mitigate the risk of bankruptcy from excessive debt. Positive free cash flow and a healthy balance sheet are strong indicators of a company’s financial strength. It demonstrates the cash available to the company after covering all operating expenses and investments. Positive free cash flow provides a company with flexibility, enabling it to consider options such as debt repayment, dividends, or further expansion. These are my primary considerations.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

 
<p style=”text-align: center;”><em>”There may be more beautiful times, but this one is ours.”</em></p>
<p style=”text-align: center;”><strong>Jean-Paul Sartre  </strong></p>

<h3><strong>ISM</strong></h3>
On Tuesday, the stock markets declined following Monday’s Labor Day closure. Tech stocks, susceptible to economic changes, were impacted by discouraging sentiment data from the industry. The Purchasing Managers’ Index from the Institute for Supply Management (ISM) continued to indicate an economic downturn. However, it is anticipated that this decline will be brief, with investors eagerly awaiting the potential interest rate reductions by the Federal Reserve in the coming days.
<h3><strong>The Fed’s Path Forward</strong></h3>
The current target interest rate the Federal Reserve sets ranges between 5.25% and 5.5%. Since mid-2023, short-term USD interest rates have remained at this level. The Fed has maintained a firm hold on the rates despite a notable decrease in inflation. However, it seems a shift may be underway. During this year’s Jackson Hole meeting on August 23, Fed Chairman J. Powell surprisingly suggested that inflation risks were in check and that the Fed might consider lowering the key interest rates. The interest rate policy will likely emphasise the labour market, which has recently shown weakness. The likelihood is high that the US Federal Reserve will decrease the key interest rate by 0.25 percentage points at the next interest rate meeting on September 18.
<h3><strong>Today’s Economic Indicators</strong></h3>
Today, several macroeconomic indicators are being released in the U.S. These indicators provide essential information about the labour market in the world’s largest economy, which has been losing momentum in recent months. The indicators include the unemployment rate, the number of employees outside the agricultural sector, and hourly wages.
<h3><strong>Conclusion</strong></h3>
Once again, everything boils down to perception. If market participants view today’s numbers favourably and refrain from raising concerns about the US economy losing momentum faster than the Federal Reserve intends, markets will experience an upturn. However, if market participants perceive today’s numbers negatively, with concerns about a significant economic downturn, markets will decline, at least in the short term.
<h3><strong>Ladies and Gentlemen</strong></h3>
As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to <a href=”mailto:smk@incrementum.li”>smk@incrementum.li</a>

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

“Life is unfair, but remember, sometimes it is unfair in your favour.”

Peter Ustinov

Germany’s Economy

Germany currently needs help with demand. The latest data on the country’s gross domestic product in the second quarter clearly shows that consumption and exports must improve. The weakness in consumption is attributed to a decrease in purchasing power caused by inflation. In real terms, employees earn 2.6% less in gross wages after adjusting for inflation compared to mid-2021. Additionally, real wages fell by 1% in the second quarter alone. The weakened consumption is particularly concerning because 75% of companies rely on domestic sales. While export earnings can contribute to job creation, a growth of approximately 10% annually is necessary to make a noticeable impact. However, exports are stagnant, and the export outlook worsened in August.

Macro Call

I do not consider myself a macro investor. As I have mentioned previously, I have reservations about the accuracy of most macro calls. In my opinion, attempting to forecast the market and make assumptions about economic developments seems akin to fortune-telling. I am a bottom-up investor. I focus on identifying sound companies trading at reasonable valuations that yield positive cash flows. Typically, I include 25 to 40 such companies in the portfolio, capitalise on dividends, and adjust the portfolio by rebalancing, adding new companies, and divesting others. This investment approach has proven effective for me and our private clients. The approach may seem a bit boring, and it certainly does not offer instant gratification, but it delivers sensible returns over time.

Bad News Creates Opportunities

As I assess the current macroeconomic conditions in Germany, it seems to me that market participants are perhaps overreacting by selling off strong German industrial companies at undervalued prices. While the reasons for this reaction are not surprising, given the prevailing uncertainty stemming from sluggish economic growth in the USA, China, and Europe, as well as comparatively high interest rates in various regions, I perceive potential opportunities within this environment, which, Ladies and Gentlemen, leads me to question whether this is now a matter of a macro call or a thorough bottom-up approach.

German Cars

In this week’s edition of “Stefan’s Weekly,” the headline asks, “Are you considering purchasing a new car?” This question is timely because of the recent rise in new car prices, causing consumers to be more careful with their spending, even more so in these challenging economic conditions and the still high interest rates, which has resulted in credit financing and leasing becoming more expensive, potentially reducing the desire to make a purchase. As a result, the automotive market is currently more favourable for buyers. There is no longer a supply shortage, purchase incentives are increasing, and transaction prices are decreasing.

An Opportunity?

The bi-weekly Swiss financial newspaper “Finanz & Wirtschaft” addressed the topic in its Wednesday edition. No significant improvement in the global car market environment is expected in the short term. Given the weakening demand in all leading markets, it is doubtful that the current year’s production forecasts will be maintained. However, looking beyond this, the picture is brightening. The economy appears to have bottomed out, and there are initial signs of improvement. Furthermore, more interest rate cuts by central banks are expected, especially in the USA. When the economy is weak, purchases are postponed, but purchases are made when the situation brightens due to the early cyclical nature of the sector.

A Question of Valuation

Volkswagen and Stellantis trade at a 2025 P/E of 3, BMW and Mercedes at a P/E of 5. Even if the forecasts have to be reduced in the weeks and months to come, the P/Es will go up accordingly; compared to Nvidia, whose stock is trading at a 2025 P/E of over 70, the German car sector seems cheap. We are patient investors and are, therefore, looking a bit closer at the industry.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

”Emotional intelligence is a crucial social skill for effective management.”

From old course materials from the University of Liechtenstein for the Executive MBA, which I completed a long time ago

Jackson Hole

The three-day Jackson Hole Economic Symposium, hosted by the Federal Reserve Bank of Kansas City, started yesterday in Wyoming, USA. The event brings together influential central bankers, finance ministers, academics, and financial market players worldwide. This year’s theme is “Reassessing the Effectiveness and Transmission of Monetary Policy.” I wonder what information we will receive from the weekend press from the event.

European Central Bank’s Path

I believe the European Central Bank should consider further lowering key interest rates at its next meeting on 11 and 12 September in Frankfurt, just one week before the Fed meeting in September. The slow economic indicators, particularly from Germany, the world’s third-largest economy, justify a rate cut in the current environment of consistently stable inflation. According to the minutes of the last interest rate meeting on 17 and 18 July, published yesterday by the European Central Bank, the upcoming September meeting is seen as a favourable time to reassess the extent of the current restrictive monetary policy. The minutes also state that “this meeting should be approached with an open mind,” which is hopefully common practice among central bankers.

FT Article on the Interventionism of the Swiss National Bank (SNB)

My friend, Freddie Hasslauer, recently penned a letter to the editor of the Financial Times, which was published a few days ago. In the letter, he delved into the success story of the Swiss central bank’s interventionism. I sought Freddie’s permission to share the link to the letter in my “Stefan’s Weekly,” and he graciously consented. You’ll find it particularly intriguing, especially if you typically oppose any intervention by central banks, as it offers an alternative perspective. Please enjoy the read: https://on.ft.com/3Xfycf3

Emotional Intelligence and Accountability

Ladies and Gentlemen, I am a little unsure and wonder whether, at the age of 61, I can maintain my conservative values or if I have to recalibrate them. I was taught as a kid by my parents, during many years on the job, and during multiple management courses many, many years, even decades ago, that emotional intelligence and accountability are crucial social skills for effective leadership. For the sake of it, suppose you were an experienced management consultant committed to sustainable corporate governance and communication who authored works on these topics. How would you assess a leader who lacks emotional intelligence, accountability and, possibly, emotional integrity? What key attributes define a great leader? Are qualities such as honesty, intelligence, integrity, and personal charisma still essential components of effective leadership today, or are they overrated? Are they just nice to have, or maybe even irrelevant, because other skills are more important? Again, just for the exercise, what qualities would you demand from a leader or even a global “Máximo Líder” if there was one, and if you had a say?

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

“I did not need the special equipment. I’m a natural, natural shooter.“

Turkish shooter Yusuf Dikec, Olympics, Paris 2024

GDP Expectation

The Atlanta Fed’s forecast for the third quarter of 2024 (GDPNow) is 2.9%. A nowcast value of 2.9% means an increase of 0.4 percentage points compared to the previous week. The forecast has not shown any recessionary tendency so far. One could discuss an incipient US recession if the forecast falls into the 1% range. At the moment, things are moving in the other direction.
(Slide 1 (atlantafed.org))

Unfounded Recession Fears?

Strong petrol and car sales boosted the unexpected increase in US retail sales in July, surpassing market expectations. Additionally, a surprising decrease in initial jobless claims eased recent economic concerns among investors. Statements by US Federal Reserve representative Alberto Musalem (President of the Federal Reserve Bank of St. Louis) also suggested an ever-stronger perceived possibility of a turnaround in interest rates in September. Next to the good results from US giants Cisco and Walmart, it seems recession fears in the U.S. faded as quickly as they appeared two weeks ago, while hopes of lower base rates were presumed.

Commodities

As I suggested last week, commodities usually only outperform during perceived times of an economic upswing or a specific crisis. It’s always the same: people tend to feel inclined to call the macro environment with simple models or sophisticated models and still get it mostly wrong. The factors influencing the macro environment are diverse and multidimensional and change dynamically and often in different directions. How can anyone accurately predict the right direction in such an initial situation? That’s why I believe making investment decisions solely based on macro analysis is highly unsuitable. Not everyone will agree, but I seriously doubt purely macro-based investment strategies. At Incrementum, we prefer working with several specific scenarios and showing that if certain events occur, it may create one or the other investment opportunity rather than predicting one macro future.

What do I like in the Commodity Field?

Currently, I like crude oil, oil service companies, and electricity. Still, I avoid iron ore because I want to see an economic pickup in China or massively lower entry levels for the stocks on my radar. I am not investing in soft commodities due to my lack of expertise. And above all, I like companies that produce cash flows and are willing to share them with their investors. Cash flows are fantastic, no cash flows, no investment! Why crude oil? Because some great companies are producing massive cashflows, the U.S. Energy Information Administration (EIA) reports that current US oil production is at 13.2 million barrels per day, a level that has been consistent for several weeks. US inventories are nearing historically low levels. The August low in WTI Crude could be a significant low for the next few months, mainly because there is typically a seasonal rise in oil prices into October. After that, anything may happen, especially if winter is warmer than expected.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

“One must beware of ministers who can do nothing without money and those who want to do everything with money.“

Indira Gandhi

Interest Hopes

Over the past few months, investors have been optimistic about declining interest rates. However, investor sentiment quickly worsened after the recent Fed meeting, during which Fed Chairman Powell indicated the possibility of an interest rate cut at the September meeting. Was this not what investors hoped to hear?

Recession Fears

The sentiment worsened due to unexpectedly poor leading indicators for the U.S. economy. The industry’s widely-watched ISM Purchasing Managers’ Index fell further into the contraction zone. Additionally, weak U.S. labour market data harmed the markets. In July, the U.S. economy not only created fewer jobs than anticipated, but unemployment reached its highest level in almost three years, with wage growth stagnating. This caused significant concern among market participants and heightened fears of a potential U.S. recession. It’s worth noting that in recent months, news of stagnant wages would have been well-received, as it would have signalled an end to the increasing wage-price cycle, potentially leading to lower inflation and raising hopes of an interest rate cut by the central bank, which was essentially announced for the September meeting.

It’s all about Perception

It’s all about perception! While numbers or actions may be well perceived at one moment, they may be perceived differently in a slightly different environment or context, combined with other data or actions.

Back Again

While writing this edition of “Stefan’s Weekly”, I would not be surprised if market participants looked back at last week’s and this Monday’s sell-off and realised they might have been exaggerating. This brings me to a topic I have been thinking about for a long time. Analysts, bankers, brokers, and journalists tend to echo each other. We often see similar comments and conclusions from apparently different sources in the media, on social platforms, and so on, especially when they concern “breaking news”. This is not only repetitive but also numbing. It is particularly concerning and potentially dangerous, especially when certain facts are taken out of context. Many analysts, bankers, brokers, and journalists have exacerbated the situation leading to this recent market correction with comments and puffery vocabulary. I cannot think much of that.

August Stats and Outlook

Since 1960, August has mostly been a positive month for the U.S. stock market, with a 0.1% increase. The performance was significantly more positive in election years, with a 1.4% increase. In 2022 and 2023, August showed a negative performance. However, the last election year, 2020, when President Biden beat President Trump, saw a strong August performance with a 7.6% increase. Let us see what August brings; today, it looks slightly better than after the hiccups in the first days.

Election Years Stats and Outlook

The stock market performance during the last year of a president’s first cycle in office shows a solid upward trend. This year, we already had a solid first half, mainly from seven stocks and also thanks to some sector rotation in Q2 and July. Let us see what the rest of the year brings.

Outlook and Commodities

Given the current state of decreasing and yet still sticky ongoing inflation, commodities present potential opportunities. However, the scenario could quickly turn if Western economies slip into a broad-based recession and China struggles to regain higher growth. Such a situation could swiftly and negatively impact the economic environment for commodities. There are always hopes that commodities can do well even during a recession, perhaps because of fear of underlying inflation, but this never really materialises. Again, I cannot think much of such a scenario. If you believe in a recession, you want to think twice about investing in commodities. If you think recession fears are exaggerated, commodities may be an exciting bet, even more so if inflation can not be tamed the way market participants hope.

My View

In my next “Stefan’s Weekly,” I will share my view on commodities. By the way, in my beliefs, gold is no commodity; it is money.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

“Reason only makes sense in the context of irrationality; it’s not reasonable to always strive for rationality.”

from “unknown” to me

Compounding in Asset Management

The compound interest effect is a powerful strategy that can inspire us to leverage small, seemingly insignificant actions to generate significant gains in asset management. This phenomenon occurs when interest earns interest, leading to exponential growth in wealth. The initial capital grows by reinvesting dividends or interest income, generating more interest and creating a growth cycle. Unlike linear growth, where growth occurs constantly, the compound interest effect results in exponential growth. The longer the money is invested and the higher the interest rate, the faster the assets grow. Visualising this effect is like watching a snowball rolling down a hill – it starts small, but with each revolution, it gains size and momentum.

1. of August 1291

The Swiss National Day is 1 August. It commemorates the founding of the Swiss Confederation, which stemmed from the Federal Charter of early August 1291. Yesterday, we celebrated this significant day with a day off, delicious food, bonfires, and fireworks. It was a celebration that we all, as Swiss citizens, could partake in and enjoy!

Compounding in Society

Okay, Ladies and Gentlemen, let’s delve into the concept of compound interest in asset management, a strategy that uses small actions to generate significant gains. What if we apply this concept to society by working towards a sensible, respectful society that leverages small actions for significant gains? Let’s consider yesterday’s Swiss national, August 1st, and apply the philosophy of the compounding effect to Swiss society. It seems like our ancestors, over more than 700 years, leveraged seemingly insignificant actions for significant gains, and today, we live in a clean and prosperous place, in a direct democracy where decency and equality prevail. It has certainly been a long journey, but looking back now, we can’t help but feel proud and appreciative of our progress. As I mentioned above, “watching a snowball roll down a hill – it starts off small, but with each turn, it gains size and momentum”.

Compounding in Society II

The question that crosses my mind is whether the effect of compounding also works for negative actions. Unfortunately, I believe it does. Political debates, where political leaders call each other names, purposefully discredit each other, lie, and seemingly are unwilling to accept consensus and/or defeat, create negative momentum, which, in the end, is bad for society. We must take 100% responsibility for everything that happens to us, focus on decision-making and continuous improvement, and, as hard as it may seem, look down the road, drift away from instant gratification, and seek exponential gains by compounding small, seemingly insignificant actions.

The Paris 2024 Olympics

So far, so good. The Paris 2024 Olympics have started with an unbelievable artistic explosion. I had never seen anything like that and was impressed by the many different levels of creativity and art incorporated into the opening ceremony in the centre of the fabulous city of Paris. Obviously, not everyone was impressed, which is fine; it is almost impossible to meet everyone’s expectations. Let’s see how this further evolves.

Next Week

Next week we will try to see what is still in the markets for the rest of the year. Let me already add that from a purely statistical point of view, August is a good month during the U.S. election year.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

“In the end, it’s not the years in your life that count; it’s the life in your years.“

Edward J. Stieglitz (commonly misattributed to Abraham Lincoln)

U.S. GDP versus German Consumer Confidence

This week’s US gross domestic product (GDP) numbers surprised to the upside, increasing by an annualised 2.8% between April and June. Experts surveyed by Reuters had only expected an increase of 2.0%. Those surprisingly strong figures for US economic growth contrast with the consumer sentiment in Germany, which has undergone an “interesting” development in recent months. According to the GfK Consumer Confidence Index, it stood at -21 points in June 2024. For July 2024, GfK forecasts a deterioration of -21.8 points. However, for August, “only” -18.4 points are expected. Germany has the third largest economy behind the USA and China, ahead of Japan.

September Interest Rate Cut

The ECB will cut in September; anything else would surprise me. The Fed, who knows? Maybe they will make a surprise move next week during the upcoming Federal Open Market Committee (FOMC) meeting scheduled for July 30-31, 2024. Else, a September cut is widely expected.

Inflation down the Road

However, in the long term and with an escalation of global trade conflicts, I expect a freshening breeze on the inflation front over the coming years. China is reaching the limits of its previous investment-driven growth strategy, but the government, just like the governments in Europe or the US, is avoiding painful adjustments. This will lead to tougher competition, and if Western countries push for higher tariffs at the same time, this will probably have an inflationary effect.  Perhaps this behaviour brings some industrial jobs back to America or Europe. Still, for most American and European consumers, life will become more expensive, as domestically produced goods in the U.S. or Europe will cost much more than comparable ones on the global market.

Spicy

Ladies and Gentlemen, we finally see some action in the American presidential elections. One old candidate is gone; perhaps the second old candidate will also hand over his baton to his nominated deputy. I think that would be a good thing for America. A breath of fresh air and fresh, younger people for an office that is probably one of the most demanding in the world seems to make sense to me.

The Paris 2024 Olympics

Ladies and Gentlemen, I expect the Paris 2024 Olympics to have a similar effect on the media than the European Football Championship. This means a welcome break from all the negative headlines we are usually inundated with.  Let’s hope for fair and conflict-free games in a spectacular setting.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

“Learning and enjoyment are the secrets to a fulfilled life. Learning without enjoyment hardens. Enjoyment without learning stultifies.”

Richard David Precht

U.S. Inflation Expectation

Inflation in the USA is easing noticeably, fuelling the financial markets’ hopes of an interest rate turnaround in September. Last Friday, weak labour market figures reinforced the conviction in the US markets that the Federal Reserve will begin to cut key interest rates in September. The Atlanta Fed’s nowcast (GDPNow) describes the US GDP trend for the second quarter of 2024. The latest estimate fell to just 1.5%. This is the lowest estimate for Q2 2024 to date. Real US GDP growth in Q1 2024 was 1.4%. A 1.5% in the second quarter would mean that US growth for the first half of 2024 is below expectations of 2.0%. The 5-year break-even inflation rate currently stands at 2.22%. It is close to the level of the previous week. There are no signs of inflation flaring up again.

Department of Labour in Washington

Yesterday’s inflation numbers by the Department of Labour in Washington showed that the June inflation rate fell surprisingly significantly to 3% from 3.3% in the previous month. This represents the lowest reading in the current year. Economists polled by Reuters had expected a slightly higher figure of 3.1%. Even more noteworthy is the fact that June prices fell by 0.1%, while experts expected an increase of 0.1%.

September Interest Rate Cut

These numbers had an immediate impact on future markets. Following the surprisingly good data, the probability of a September interest rate cut by the US Federal Reserve is now estimated at 85%, up from around 70% just before the publication of the inflation numbers.

U.S. Interest Rates Development

The 10-year US yield already ended trading last week at 4.28%, thus below the 1-year moving average and the 200-day line. It not only closed the price gap but fell below it, which is a negative sign. (The weaker the US economy and US inflation, the more yields are likely to fall). However, Mr Powell did not indicate any immediate interest rate cut during his recent performance before Congress members. I suppose this will change in the near-term future.

UEFA EURO 2024

Ladies and Gentlemen, the European Football Championship is over for Germany and Switzerland. Hans and I will support Spain or England. Despite the elimination, I am happy about the Swiss team’s performance. For the last few weeks, the media over here concentrated on issues other than immigration and war thanks to EURO 2024, Switzerland’s good performance, and, again, at least here in Switzerland, Taylor Swift, who gave two apparently remarkable concerts. This was a fantastic and more than welcome break.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li