Beyond Forecasts: The Investor’s “Bullshit Radar”

Good Morning Ladies and Gentlemen

“It’s impossible to take time off.”

Bloomberg Weekend

I appreciate your understanding as I express this directly: I believe it is essential for investors to cultivate their own internal filter or „bullshit radar.“ In a landscape saturated with narratives, hype, and persuasive storytelling, the capacity to critically evaluate claims and distinguish between substance and noise is vital. This mindset fosters discipline, scepticism, and independent thinking, qualities that can safeguard capital and diminish the risk of being drawn into fashionable yet fundamentally weak investments. Ultimately, nurturing this awareness is not an exercise in cynicism but rather a matter of responsibility: it empowers investors to make more informed and resilient decisions amid the market’s incessant distractions.

Inflation Expectations in Europe

The pronounced reduction in inflation within the eurozone has led to a relatively minor shift in investors‘ interest rate expectations. Current projections within the futures markets indicate an anticipated inflation rate of approximately 3% by the close of December, suggesting an impending increase in the interest rate from 2.25% to 2.50% during that period. Presently, the eurozone’s inflation rate stands at 2.8%, a significant decrease compared with forecasts from analysts affiliated with the eurozone’s central banks, who project a baseline scenario in which inflation is expected to stabilise at 3.4%. Even within the central banks‘ more optimistic projections, inflation is not anticipated to fall below the 3% threshold by year-end. Notably, a considerable deceleration in inflation in the services sector was recorded in June, partly attributable to seasonal public holidays and extended weekends, which likely contributed to inflated accommodation prices in the preceding month.

Inflation Expectations in Switzerland

In Switzerland, the likelihood of an interest rate adjustment from 0% to 0.25% by June 2027 has risen to over 50%, a significant increase compared with the lower probabilities observed in the recent past. A luxury problem, you may think and yes, indeed, it probably is. Ladies and Gentlemen, never underestimate that this exemplifies nothing more than effective long-term budget discipline.

The U.S. Labour Market

The U.S. labour market lost considerable momentum in June, adding just 57’000 non-farm payrolls, well below expectations of 110’000. The disappointment was compounded by downward revisions to previous data, with May job gains reduced to 129’000 from the initially reported 172’000. Taken together, these figures point to a cooling labour market and suggest that higher interest rates are increasingly weighing on economic activity. From an inflation perspective, the slowdown may be welcomed by policymakers, as weaker hiring typically dampens wage growth and consumer demand. If this trend persists, it could contribute to a gradual easing of inflationary pressures in the months ahead.

The U.S. Unemployment Rate

However, on a more positive note, the labour market delivered a modest surprise. The independently calculated unemployment rate declined to 4.2% in June from 4.3% in May, suggesting greater resilience than many economists had anticipated. At first glance, this appears to be encouraging news, easing concerns about a sharper economic slowdown. Yet the implication for inflation is less straightforward. A labour market that remains relatively tight in principle supports household incomes and spending, reducing the downward pressure on prices that policymakers hope to see. In other words, stronger employment may come at the cost of keeping inflation elevated for longer than expected.

Stalemate

This presents a classic stalemate for policymakers. On the one hand, weaker labour market data suggests a reduction in inflationary pressures. On the other hand, a better-than-expected and resilient unemployment rate. Yet, inflation expectations remain significantly impacted by energy prices, which can fluctuate independently of domestic economic conditions. In this context, movements in commodity markets may be more pivotal than trends in the labour market. Looking ahead, there is a reasonable possibility that inflation could moderate in the coming months. The diminishing effects of El Niño may help alleviate certain supply-side pressures, particularly in food and energy markets, thus contributing to a gradual decline in headline inflation and enhancing overall sentiment.

Conclusion

Investors today face a complex and often contradictory economic landscape. Inflation in Europe is proving more resilient than many had anticipated, Switzerland continues to reap the benefits of long-term fiscal discipline, and the U.S. economy is sending mixed signals, with a cooling labour market alongside an unexpectedly stable unemployment rate. In this environment, certainty remains elusive. Rather than solely relying on forecasts, investors would benefit from cultivating independent judgment and maintaining a healthy degree of scepticism. In a landscape shaped by competing narratives and shifting expectations, disciplined thinking becomes one of the most valuable assets. Ultimately, successful investing is less about predicting the future and more about skillfully navigating uncertainty with patience, humility, and sound judgment. It is important not to be disheartened if you do not succeed every time; making mistakes and facing setbacks are inherent to the investment journey.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and 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