The third-quarter reporting season is in full swing, with one major domestic concern after another issuing disappointing results. The numbers game was kicked off by flavour and fragrance producer Givaudan, whose earnings figures came in just a hair’s breadth above analysts’ expectations. ABB didn’t do any better: revenue turned out rather weaker than hoped, ensuring that estimates for net earnings were also missed narrowly. The fact that the industrial group then nevertheless raised its forecast slightly did not attract any more bulls, with the share price plunging more than 5%. As if that was enough bad news, the two heavyweights, Nestlé and Roche, also disappointed with their figures. The world’s largest food producer has now seen volumes drop for the fifth quarter in a row, while the pharmaceuticals giant continues to feel the after-effects of coronavirus. Roche's participation certificates then plummeted to a new four-year low, with Nestlé again dipping into double-digit territory.
The disappointments also affected the SMI, which recently fell towards 10,000 points. That represents a total fall of 3.1% since New Year for Switzerland’s benchmark index, making it by far the worst performer compared with its European and American counterparts. Over this period the EURO STOXX 50 has risen 5.8%, the S&P 500 as much as 9.0%. One reason for the significant underperformance is the particular composition or weighting of the SMI, with the two heavyweights – Nestlé and Roche – alone responsible for some 37% of the index’s movement. If ABB, Givaudan and Lonza – at its investor day the pharmaceuticals supplier once again dampened expectations for the year ahead – are included, the figure is almost half.
Given this weight distribution in the index, it is not surprising that the SMI is currently performing below par. This distribution also means that the good news that is certainly also around almost gets lost in the overall price trend. Logitech, for instance, the manufacturer of computer peripherals, more than exceeded expectations for both revenue and operating profits. The figures from Novartis likewise came in ahead of analysts’ forecasts, albeit by not as much as those of the Vaud-based company. Like Logitech, though, the pharmaceuticals group raised its outlook for the year as a whole. Last but not least, Sandoz, the recent spin-off from Novartis, likewise reported impressive results from its first quarter as an independently listed company. The generics specialist also reaffirmed its guidance for the current year.
The current performance of the Swiss Market Index demonstrates once again how clumping can become a risk. This is all the more so when defensive sectors such as the food industry and healthcare enter a downward spiral alongside companies that are more sensitive to the economy. No will there be an all-clear from the economy any time soon: according to a recent UBS survey of 37 analysts, the Swiss economy will not improve over the next six months. Indeed, in October the corresponding indicator actually worsened from minus 27.6 to minus 37.8, remaining below zero for the 20th month in a row. From an investment point of view, broad diversification often pays off in a difficult environment. Investors do not need to go looking for it themselves, however, because the sophisticated index concept of the FuW Swiss 50 allows such a strategy to be implemented easily and effectively. Before taking a closer look at the barometer, though, a little spoiler: over one year, the FuW Swiss 50 Index has performed some 7 percentage points better than the SMI.
Source: Refinitiv, as of: 27.10.2023