IMT Management

INVESTMENT OUTLOOK

12.2015

The shocking events in November       were a sharp reminder of the ever-present geo-political risks. Markets       remained very calm though, despite the terrorist attacks in Paris and       Mali, Turkey’s downing of a Russian jet fighter on its border with Syria,       and Belgium’s four-day shut-down of Brussels because of terror fears. In       the following, we discuss why this time the impact on financial markets       has been limited.       Overall, November was a good month for developed equity markets. Fed       rate-hike expectations rose. The market-implied probability of a Fed rate       hike on 16 December climbed to about 75%, pushing US bond yields up. In       anticipation of further ECB quantitative-easing measures European yields       fell. On December 3, however, the ECB disappointed market expectations,       which led to sharp corrections, especially in equity markets and the       EUR-USD exchange rate.       In November, commodities continued to sell off and the gold price fell to       its lowest level since 2009, confirming that the Gold bubble is still       deflating.             We hope you enjoy our analysis.             Best regards,

Thomas Trauth       CEO - IMT Asset Management

Geo-political risks are back on the agenda

While we were all deeply shocked by the sudden terrorist attacks, financial markets remained well behaved. Developed market equities performed well, with the DAX rising 4.9% in November, followed by the Nikkei up by 3.5% and the EuroStoxx50 up by 2.6%. The S&P500 remained about flat, +0.1%, while the MSCI Emerging Markets index lost 4%.
In line with rising Fed rate-hike expectations, US yields rose. At the same time, European yields fell in anticipation of further ECB easing measures, resulting in a further widening of the US-European yield spread.
Divergence of monetary policies led – not surprisingly – to further USD strengthening against most major currencies. The EUR-USD exchange rate fell by 4% in November and traded around 1.06 at the end of the month. The Swiss franc remained almost unchanged vis-à-vis the Euro. 

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