The first three months of the year were very pleasing for investors. Various market indices, such as the American S&P 500 or its German counterpart (DAX 30), reached new record highs almost daily. Even the leading index for Japanese equities (Nikkei 225) surpassed its previous record high from 1989.

It is therefore not surprising that we are increasingly being asked whether it is still worth investing now.

The short answer is simple: Yes. The long version follows below.

Review

All traditional main asset classes contributed to the positive performance (in CHF):

• Global equities: +16.2%

• Gold: +16.0%

• Swiss equities: +6.0%

• Swiss real estate funds: +4.5%

• CHF corporate bonds: +0.6%

• Swiss government bonds (3-7 years): +0.6%

As a result, every continuously invested findependent portfolio achieved a positive return. This is very pleasing.

Equities more than lived up to their reputation as "return generators" this quarter. In particular, those in the USA, Europe, and Japan recorded significant price gains. It helped that, primarily thanks to the US economy, the picture of a growing global economy was confirmed and, at the same time, the most important central banks expect lower interest rates in the foreseeable future.

Assessment

In the financial markets, (almost) anything is possible at any time. Stock prices rising from one all-time high to the next are no rarity. For example, a recently published study by Schroders showed that the leading index for the US stock market was at an all-time high [1] in about 30% of cases over the last nearly 100 years. During this period, US equities yielded an average return of about 10% per year (in USD), even though several major crises occurred.

Why is this so?

Equity investors are shareholders in companies. On the one hand, they "risk" their invested capital, i.e., in the event of a company's bankruptcy, the share may be worth nothing. In return, however, they participate directly in its long-term success. Under the assumption that the global population continues to grow and tends to become wealthier, innovative and well-managed companies are highly likely to generate increasingly higher earnings, which inevitably translates into higher share prices in the medium to long term.

Rising stock prices and new highs are therefore not a warning signal per se for an immediate stock market crash. Rather, they are an indicator of the ongoing development of humanity. On the contrary, anyone who sells their shares at every all-time high is highly likely to miss out on participating in structurally rising share prices.

The passage known to all of us from traditional marriage vows sums it up perfectly:

Long-term-oriented investors hold on to their investments, for better or for worse.

Outlook

We do not make forecasts. Our recipe is and remains simple. Invest for the long term, broadly diversified, and at low cost.

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Footnote:

[1] https://www.schroders.com/en-ch/ch/professional/insights/scared-of-investing-when-the-stock-market-is-at-an-all-time-high-you-shouldn-t-be/