SMI PR Index 10-year and 30-year chart – Outlook 2019 and Considerations

To help me gage where the stock market in Switzerland is currently standing I find it useful to look at the price action over the last decade, and the last three decades for context.

Trade & Geopolitical Newsflow

In the last days many bearish articles have been published on websites like marketwatch.com, cash.ch and the mood generally is one of great caution ahead of possible geopolitical risks like Brexit (EU-UK), USA-China, USA-Russia, USA-Iran and also conflicts and instability in Venezuela and Syria. Then there are also internal problems in countries like France (small scale civil unrest). Italy is economically fragile.

But also closer to home, relations between the EU and Switzerland have been better (CH-EU) and is currently not getting easier. 04FEB18 there was news that the EU will not finance Swiss NGOs to the tune of CHF50m. Just another indicator.

All this is on the mind of boards considering investments. Investment decisions could get postponed which will accelerate recession tendencies.Compared to the last decades there is currently a lot of negative news influencing the masses, potential investors, investors.

What is positive: It doesn’t seem like there is a lot of speculation in the equity market, unless you consider central bank injected liquidity to be a source of worry.

Looking at the SMI

It appeart like 8’000 level has held and attracted investors over multiple years and is a strong technical support area. On the other hand 9’000 level keeps attracting sellers. Positioning at SMI 9’000 may be attracting shorts in futures. I am also pondering the seeming low risk of betting the market will not breakout to 9’500 over next months. Especially considering the large SMI weighted defensive stocks such as Nestlé, Novartis and Roche aswell as the insurance companies Swiss Re, Zurich will be traded ex-dividend (2-5%). This should cap any move up.

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