Economic and Corporate Landscape and Some Trends

Good Morning Ladies and Gentlemen

”No matter how many warnings are issued or how many laws are written, people will find new ways to believe that the good times can last forever.”

Andrew Ross Sorkin

The equally weighted S&P 500 index has exhibited a sideways movement since the conclusion of July. In contrast, the traditional S&P 500 index has demonstrated a significant upward trajectory during the same period. This divergence in performance indicates that a select group of equities, often referred to as the „magnificent seven“, have been pivotal in driving the overall dynamics of the U.S. stock market.

Economic Landscape and Custom Duties

Numerous developed nations‘ economic landscapes are currently exhibiting suboptimal performance. The United States‘ situation is no different. However, it experienced robust economic growth leading up to 2025’s commencement and still benefits from it.
Customs duties are an additional tax obligation imposed by governments on imported goods, functioning similarly to tax mechanisms. Consequently, an increase in value-added tax (VAT), for example, would have a similar impact on consumers, probably leading to higher costs for goods and services.

Economic Landscape and Supply Changes

Despite the challenges presented by tariffs both threatened and implemented by the United States, global supply chains appear to have stabilised. A key contributing factor to this resilience may be attributed to the strategic realignment and adjustment of supply chains undertaken by many companies in response to the COVID-19 pandemic. The necessity for a diversified approach to sourcing during this period has fostered enhanced robustness within these supply chains.

Corporate Indebtness

In the aftermath of the financial crisis, many corporations have substantially reduced their levels of indebtedness, demonstrating a tendency towards deleveraging and prudent financial management. This shift indicates a strategic move away from excessive leverage, allowing firms to strengthen their balance sheets and enhance overall financial stability.

Government Indebtness

While France is often cited as a negative example of government debt in Europe, and it indeed has its own debt challenges, it is important to recognise that France has refinanced its debt during periods of low interest rates by issuing long-term government bonds at these low rates. As a result, France is less affected by short-term interest rate fluctuations. In contrast, the situation in the United States is quite different. Since the financial crisis, government debt has increasingly been refinanced on a short-, to very short-term basis. Therefore, the dependence on short-term interest rates in the U.S. is a critical factor that cannot be overlooked.

Conclusion I

After the recent and hefty increase, I would not be surprised by a trend away from tangible assets towards productive assets. Other than that, the three major trends are demography, technology, and changes in global politics, which will continue to accompany us.

Conclusion II

Oh yes, and one last one, I could well imagine that if the Supreme Court were to declare customs duties unconstitutional and subsequently abolish them, it could potentially precipitate significant disruptions in the American bond market. Do not get me wrong, I think tariffs are generally bad for the economy and especially for consumers; however, the market has accepted this new reality, and any new changes would likely lead to an even greater loss of trust than already experienced.

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

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