Why gold shined amid August's market turbulence |?September market trends
Join Victor Cianni, FRM Alpian's Chief Investment Officer, as he navigates the twists and turns of the markets during June 2024 following the rhythm of one special song. To listen to the song of the month, you can follow our Spotify playlist.
We hope you had a wonderful summer! For many, vacation now feels like a distant memory. And unfortunately, the financial markets aren’t making the return to reality any smoother: They seem to be competing with the weather to see which can be more unpredictable.?
But don’t worry, we have reasons for you to feel optimistic!?
On our end, our efforts are beginning to pay off. We’ve been recognised by moneyland.ch as the leader in cost-effective asset management services among Swiss banks. This reaffirms our mission to make premium financial services accessible to everyone, and we couldn’t be prouder! ?
But affordability is only part of the story. Over the past two years, we’ve also outperformed the average Swiss asset manager (according to Performance Watcher) across most risk profiles.?
And that’s not all—we have two more news for your wealth, which we’ll save for the end of this newsletter.?
Now, let’s turn to the latest financial news, and I’ll pass the pen to the newest member of our investment team.?
The market at a glance
Gold
Hello everyone, this is Hugo Flament , the newest member of the Investment team. For my first month at Alpian, I challenged myself to write this newsletter, and I hope there will be many more to come! ?
Despite the holiday season, August was anything but restful. Volatility impacted global equity and bond markets. Even though things started off rough, the major indices managed a solid comeback by the end. And in the turmoil, one asset shined: Gold, which is why it deserves a bit of focus in this newsletter.?
In 1983, while the price of the precious metal posted a modest decline of 1.2% for the year, Spandau Ballet was singing "Gold," a tribute to resilience and timeless value.?These qualities particularly resonate today with those holding gold assets. With prices flirting dangerously close to $2,500 an ounce, the precious metal hit historic highs.?
This meteoric rise confirms a record year for gold, with an impressive performance of nearly 23% since the start of the year. This surge raises some questions: What does the future hold for it? Will September be just as golden, or will gold stabilise after this historic spike? And what does this imply for the rest of the markets? ?
Before answering this question, let's review the key elements of this month's performance:?
Read the full analysis here
Demystification room
Did you say "carry trade"??
Have you ever wondered why the Japanese yen plays such a central role in global financial strategies? This month’s fluctuations in the yen have demonstrated their ability to influence global markets, leading to notable movements in equity markets. The persistent weakness of the yen, largely attributed to the ultra-loose monetary policy of the Bank of Japan (BoJ), has increased the appeal of the “carry trade”, a strategy favoured by investors.
So, what is the “carry trade”, and why is the yen so crucial to this strategy?
In short, carry trade involves borrowing in a low-interest currency, like the yen, to invest in higher-yielding assets in other countries.
领英推荐
Japan, with its historically low interest rates, is an ideal source of funding for these transactions. The Bank of Japan has maintained these low rates for a long time to stimulate the economy and counter deflationary pressures. As a result, the yen becomes the currency of choice for many investors seeking to maximise their profits with higher returns than those offered by the Japanese market.
Let’s take an example to make it more concrete: Imagine an investor borrows yen at a very low rate to buy U.S. bonds yielding 4%. The difference between the low borrowing cost in yen and the higher return on U.S. bonds constitutes the profit. If the yen remains stable or depreciates, it’s all gain! This strategy becomes even more attractive when the interest rate differential between the two currencies is significant, as is often the case with the yen.
However, this strategy is not without risks. Nothing is ever simple in finance!
Recently, the Bank of Japan surprised everyone by raising interest rates, from -0.1% to 0.25%. A small change that nonetheless triggered waves of disengagement from the carry trade, leading to a rapid rise in the yen.
The consequences were swift: the valuation of yen-financed investments dropped, contributing to the decline in the S&P 500 in early August. Some of this impact has since been recovered, but the example is striking.
The main danger of the carry trade lies in the volatility of exchange rates and the unpredictable decisions of central banks. A sudden appreciation of the borrowed currency can turn potential profits into significant losses. Similarly, an unexpected change in monetary policy—such as a rate hike—can quickly reverse expected returns. And when investors rapidly unwind their carry trade positions, the shockwaves on the markets can be severe.
This phenomenon reminds us of an important reality in global financial markets: what seems like a small adjustment in local monetary policy can have repercussions far beyond national borders. A simple interest rate change in Japan can affect investors worldwide, trigger movements in equity markets, and even influence economic decisions elsewhere. It's a true butterfly effect in action.
Thus, this situation clearly shows the importance for investors to stay vigilant regarding central bank policies and global economic conditions. In such an interconnected financial environment, staying informed—for instance, by following our newsletter—is a great way to better understand and anticipate international market developments.
Alpian news
More for your wealth!?
At Alpian, we are firm believers in the “slow and steady wins the race” approach. Wealth is built over time, sometimes across generations, and our role as a bank is to support you on that journey. ?
The obstacles are numerous: inflation, taxes, and sometimes unpredictable financial markets. But there’s one thing we can control—fees. While banking services come with costs, we believe in a fair and transparent business model, and this principle is at the core of Alpian’s foundation. Today, we are excited to do even more for you:?
No more account management fees: We listened! Thousands of you responded to our survey and expressed the desire for a completely fee-free banking account.?
Competitive interest rates: We continue to offer interest rates above 1.0% on cash accounts (with monthly credited interest) for balances above CHF 100,000. For lower balances, our interest rates remain among the most competitive in Switzerland, with no strings attached. We've also introduced positive interest rates on EUR (1% up to EUR 500,000) and USD (1% up to USD 100,000).?
New investment opportunities: Soon, we’ll be launching a new investment offering starting at CHF 2,000, designed to help those who want to explore investing take that crucial first step.?
Events
Get a ticket to the Sauvage Music Festival!
At Alpian Bank, we're thrilled to sponsor exciting events across Switzerland. We've partnered with Sauvage Musique, a unique festival featuring live DJs, and have some tickets to give away.
To claim your ticket, simply check the different festival dates?get in touch with a bank specialist via the chat and let them know which date you'd like to attend. You can get a ticket just for yourself!
Not a client yet? No worries! Sign up with Alpian using the code SAUV24, and we'll give you a CHF 150 bonus. Don't miss this opportunity to enjoy great music and exclusive benefits with Alpian! Find more information here.