Return to growth 

Rising interest rates and galloping inflation have thoroughly unsettled consumers over the last year. This threatening combination also sometimes caused the economy to slow down. In Switzerland the growth in gross domestic product (GDP) halved to 2.1% in 2022, while in the USA the rate of expansion fell to the Swiss level after reaching almost 6% the previous year. Following a weak first six months, however, the graph started to head up again, and the upturn is gaining strength this year too. Although the overseas economy grew by only 1.1% at the start of 2023, the second quarter saw an annualised growth rate of 2.4%, exceeding the average expectations of economists. The domestic economy has put in a strong start to the year, causing the Swiss State Secretariat for Economic Affairs (SECO) to confirm its growth target of 1.1% for 2023 and forecast an acceleration to 1.5% in 2024.

Inflation on the retreat

The positive growth figures go hand in hand with an all-clear on the inflation front. The rate of increase in the price of goods and services in the US fell in June to its lowest level in more than two years. Consumer prices climbed by only 3.0% compared with the previous year, the smallest rise since March 2021. In Switzerland prices are actually falling again, the national consumer price index slipping 0.1% in July compared with the previous month. The Federal Office for Statistics calculated year-on-year inflation at 1.6%. In the eurozone, too, the graph is pointing downwards: last month inflation decreased to 5.3%, having reached 10.6% at its peak in October 2022. Furthermore, according to provisional estimates the economy in the currency zone as a whole also grew at a faster than expected 0.3% in the second quarter.

Tourism as an economic factor

Although Germany, Europe's largest economy, is still showing signs of weakness, southern European states especially are returning to growth. One of the reasons for this is tourism. According to UNWTO data, for instance, southern Europe rebounded to its pre-pandemic level at the start of the year. It is not only the old continent that is seeing greater bookings, though: the itch to travel is increasing across the world. Last year a little over 960 million tourists travelled abroad, which means that two-thirds of the pre-coronavirus figure has already been regained. Overall, international arrivals in the first quarter of 2023 came to 80% of the level before the outbreak of the virus. At 235 million, the number of tourists was more than twice as high as in the same period of 2022. “The start of the year has shown again tourism's unique ability to bounce back,” stated UNWTO Secretary-General Zurab Pololikashvili, adding: “In many places, we are close to or even above pre-pandemic levels of arrivals.” Receipts from international tourism grew back to hit the USDtn 1 mark in 2022, with Europe accounting for the largest share at nearly USDbn 550.

Bullish share prices

Many sectors are profiting from the recovery in tourism, including airlines, aircraft manufacturers, hotels and even the entertainment and cruise industry. Share prices in the last of these sectors have metaphorically gone through the roof this year. Cruise ship giants Royal Caribbean and Carnival, for instance, have posted three-figure percentage gains since the turn of the year. Shares in aircraft manufacturers Airbus and Boeing, though, have also appreciated markedly so far in 2023 thanks to flourishing business. In the first half of the year, for example, Boeing took in orders for a good 1,000 aircraft, almost four times as many as in the same period the previous year. The two rivals also managed to beat expectations with their sales and earnings figures for the second quarter. Another positive development is that Boeing CEO Dave Calhoun is looking to ramp up production of its bestselling 737 MAX to 38 machines a month, 7 more than previously, in light of the global recovery in aviation traffic.

Source: Statista

Economic winners in one package: Tracker on the Swissquote Recovery Index

Broad-based recovery

A wide range of companies are profiting from the economic revival. As already revealed, the tourism sector is well out in front. Not only have the end of the coronavirus pandemic and fuller wallets thanks to pay increases given wings to the travel bug, but there is also a little more loose change for a hot drink or burger every now and then, which the renowned coffee shop chain Starbucks and KFC owner Yum!Brands are happy to provide. The after-work beer is also returning to popularity with rising incomes and greater confidence in the economy, something which is causing the tills to ring again for Wetherspoon, the British pub chain that also owns some hotels. On the subject of hotels, leading global names such as Hilton and Marriott are enjoying higher reservations in line with the recovery. Both companies managed to exceed Wall Street expectations for sales and profit estimates in the second quarter and also raised their outlooks for the year as a whole. The same was true of Booking Holding, the operator of online travel portals.

Diversified index

The economic rebound is also causing shares in the corresponding companies to soar in value. The share price of Booking Holdings climbed by more than half in 2023 and has just reached an all-time high. Hotel chain Marriott achieved a remarkable increase of slightly more than one third, likewise setting a new record recently. Stock of budget airline Ryanair similarly grew by a little over 30%. Even the share price of Hungarian Wizz Air rose by a quarter in the wake of operational successes. Not only did the airline post a new passenger record last year, but the group also flew back into profit. It would truly be a mammoth task for investors to keep an eye on all the shares that gain from an improvement in the economy. That is something investors do not even have to consider, though, thanks to the solution by the name of the Swissquote Recovery Index. The actively managed barometer is currently made up of 32 components, including all the companies mentioned in the text so far.

Promising sectors

On a sector view, the tone of the Swissquote Recovery Index is set by the aviation industry. This sector currently contains eleven companies of the barometer which together add up to one third of the index weighting. If cruise providers, hotels and booking platforms are added, the tourism sector accounts for almost half the benchmark. The absolute heavyweight, however, is Madison Square Garden Sports from the entertainment industry. This is a professional sports company which owns teams such as the New York Knicks in the National Basketball Association (NBA) and the Rangers of the National Hockey League (NHL). The strategy barometer is also broadly positioned in the entertainment sector. The index includes, for instance, leisure and theme park operator SeaWorld Parks & Entertainment, film exhibitor Cinemark Holdings and Dave & Buster’s, an owner of video game arcades and bowling alleys. Strayer Education is the stock with the highest weighting at 6.2%. The company specialises in educational services and also owns its own private university.

Outperformers for the portfolio

Leonteq’s tracker on the diversified Swissquote Recovery Index offers investors convenient and low-cost access to a large number of international companies that profit from an economic upturn. The active approach ensures that the composition can always be adjusted to the latest developments on the market. To that end the index is reviewed quarterly by the experts and adjusted where necessary. The costs incurred for this come to a moderate 0.85% p.a. So far the strategy has paid off: in the current year the certificate on the Swissquote Recovery Index has climbed more than 11%, while the SMI has posted a rise of only around 3%. 

Source: Swissquote, as at: 07.08.2023

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This document constitutes Advertising within the meaning of article 68 of the FinSA.

This publication serves only for information purposes and is not research; it constitutes neither a recommendation for the purchase of financial instruments nor an offer or an invitation for an offer. No responsibility is taken for the correctness of this information. Investors bear the full credit risk of the issuer / [guarantor] for products which are not issued as COSI® products. Before investing in derivative instruments, investors are highly recommended to ask their financial advisor for advice specifically focused on the investor´s financial situation; the information contained in this document does not substitute such advice.

This publication does not constitute a simplified prospectus pursuant to art. 5 CISA, or a listing prospectus pursuant to art. 652a or 1156 of the Swiss Code of Obligations. The relevant product documentation can be obtained directly at Leonteq Securities AG via telephone +41 (0)58 800 1111, fax +41 (0)58 800 1010, or via email termsheet@leonteq.com.

Selling restrictions apply for the EEA, Hong Kong, Singapore,the USA, US persons, and the United Kingdom (the issuance is subject to Swiss law).

The Underlying’s performance in the past does not constitute a guarantee for their future performance. The financial products' value is subject to market fluctuation, which can lead to a partial or total loss of the invested capital. The purchase of the financial products triggers costs and fees. Leonteq Securities AG and/or another related company may operate as market maker for the financial products, may trade as principal, and may conclude hedging transactions. Such activity may influence the market price, the price movement, or the liquidity of the financial products.

Insofar as this publication contains information relating to a Packaged Retail and Insurance-based Investment Product (PRIIP), a Key Information Document in accordance with Regulation (EU) No 1286/2014 (PRIIPs Regulation) is available at https://www.priipkidportal.com/

Any - including only partial - reproduction of any article or picture is solely permitted based on an authorization from Leonteq Securities AG. No responsibility is assumed in case of unsolicited delivery.

© Leonteq Securities AG 2023. All rights reserved.

Switzerland boasts not only beautiful landscapes but also an attractive stock market. There are many reasons to love Swiss equities: they are among the most defensive, they offer high balance sheet quality, and they are fundamentally less susceptible to economic cycles thanks to their market-leading profit margins and superior pricing power.

The recent earnings season also proved the strength of Swiss companies: around two-thirds of company reports surprised on the upside, and earnings growth is expected to be 8% this year. Finally, Swiss equities are currently still relatively attractively valued, trading below their ten-year average. So it is no wonder that investors turn to them in times of uncertainty.

Investors might also turn to capital protection products when the going gets tough, as they allow investors to participate in the performance of the underlying while protecting some or all of the capital at maturity.

With better terms now available on capital-protected solutions following the rise in interest rates, Julius Baer is launching a new USD product on the Swiss Market Index (SMI) with 100% capital protection at maturity. It offers upside participation, with a maximum return of just under 20%. If the SMI rises by 20% or more during the lifetime of the product, the performance of the underlying is replaced by a 10% coupon, paid at maturity.

For further information about this product, click here.

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This content is intended for information purposes only and does not constitute advice, an offer or an invitation by, or on behalf of, Julius Baer to buy or sell any securities, securities-based derivatives or other products or to participate in any particular trading strategy in any jurisdiction.

Julius Baer does not accept liability for any loss arising from the use of this document.

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For further details about risks and suitability, as well as important legal information, please consult the following link: IMPORTANT LEGAL INFORMATION

Cryptocurrency exchanges in focus

Volatility is one of the central characteristics of Bitcoin. This was demonstrated once again in spring this year when sudden negative headlines around the world's largest cryptocurrency exchange, Binance, caused the digital asset to suffer a marked correction in the middle of an upward trend. The company had repeatedly suspended Bitcoin withdrawals due to an unexpectedly sharp increase in transaction costs, making users nervous. Back at the end of March, investors withdrew USDbn 1.6 within the space of a few hours due to a lawsuit filed against the exchange by the US derivatives regulator CFTC. This did not damage the reputation of Bitcoin, however: indeed, the chaos at Binance actually brought the competition onto the scene. The brokerage Charles Schwab and asset managers Fidelity and Citadel, for instance, joined forces to launch the “EDX Markets” cryptocurrency exchange on 19 June with a view to offering investors a reliable alternative following the collapse of FTX and given the growing scepticism towards Binance.

Price rally thanks to Bitcoin ETF

Almost simultaneously with the launch of EDX Markets, speculation about the licensing of a listed Bitcoin ETF in the USA led to an upturn in the mood. The application was made by no less than the world's largest asset manager BlackRock. “This would have a signal effect for the whole world,” says analyst Timo Emden of Emden Research. BlackRock would like to cooperate on this with the Nasdaq and Coinbase. This gives Coinbase, which was recently targeted by the SEC, weighty backing. Ark Invest, Fidelity, VanEck and WisdomTree are among those also working with Coinbase in this sector. The new licence application triggered a rally in the oldest digital currency in the world, the cyber currency even crossing the USD 31,000 barrier to reach its highest level in a year.

Increasing confidence

Should trading in BTC spot ETFs abroad be allowed, this could bring a little calm back to the digital currency cosmos in general, with cryptos having recently been dominated by unfavourable reports. In February this year, for instance, the US financial authorities barred Binance from issuing new digital coins of the USD-linked Binance USD. A class action against Ripple, issuer of the cryptocurrency XRP, is also under way at the moment. This year, though, the bedrock Bitcoin managed to detach itself from these new “threats”. Confidence in this cyber currency appears to be strengthening little by little again. Since its interim low in mid-November 2022, when the price plunged below USD 16,000, the currency has more than doubled. Bitcoin has appreciated by somewhat more than 80% just since the turn of the year.

Tailwind from institutional investors

On the subject of confidence, this is also evident from the Bitcoin holdings of OTC desks, regarded as a proxy for institutional activity, which hit a 1-year high in June. “In our view, increased balances on OTC desks suggest that institutions and other large capital allocators are focused increasingly on Bitcoin,” wrote the experts of ARK Invest in a recent report. And since BlackRock applied for its spot Bitcoin ETF, the discount to the net asset value (NAV) of the Grayscale Bitcoin Trust (GBTC) has fallen from -40% to -30%. According to the investment company founded by star fund manager Cathie Wood in 2014, the narrowing discount suggests that the market could be pricing in the approval of a Bitcoin spot ETF – which increases the likelihood of the GBTC being converted into one. At the end of June, the crypto investment giant Grayscale filed an appeal against the SEC decision rejecting the conversion of the GBTC into a BTC spot ETF. What is more, nearly 70% of the 19.4 million bitcoins in circulation have not moved in at least one year or more, confirming a strengthening holder base. The quantity of Bitcoin held for a year or more has thus reached an all-time high in both relative and absolute terms.

Graph: Market capitalisation of the top 10 cryptocurrencies

Source: ARK Invest

Promising Bitcoin investment:

Actively managed strategy delivers outperformance

Return without the adrenalin rush

If it came about, the licensing of a BTC spot ETF would obviously be a huge accolade for Bitcoin and the like and bring crypto assets a step closer to the mass market. Whether the astronomical targets of up to USDmn 1 that Ark Invest CEO Cathie Wood, for instance, reckons will be reached by 2030 will actually be hit remains uncertain. Nevertheless, rising demand for Bitcoin could certainly have a positive impact on its price. With a sophisticated strategy, it might even be possible to surpass the performance of the crypto heavyweight. The Swissquote Bitcoin Active 2.0 Index developed by Swissquote Bank has left Bitcoin trailing in its wake since it was launched in July 2020. Having risen 247%, the cryptocurrency strategy outperformed the digital coin by 17 percentage points. That is far from all, however: at the heart of the strategy is the reduction in volatility. Anyone who has followed Bitcoin over the last few years will know how quickly price trends can turn and how high the fluctuations can be. Swissquote’s more conservative management ensures that the adrenalin rush for investors remains within limits. This is achieved by stocking up cash holdings in uncertain phases and downward trends. Ultimately, the aim is to achieve more consistent potential returns over the long term.

Elaborate concept at a favourable price

The clever concept is based on artificial intelligence – or machine learning, to be more precise. In this process data from a variety of sources are captured in order to form quality indicators. These are made of up the average of the changes, the actual volatility, the buy-side and sell-side pressure and a social index for the market mood. The algorithm compiles and interprets this wealth of data, identifies the development of future returns at an early stage and then structures the portfolio based on this comprehensive analysis. To limit volatility, Bitcoin accounts for at least 60% and not more than 100% of the holdings, while US dollars make up the remaining 40% to 0%. The corresponding tracker certificate (ISN CH0542378622) on the Swissquote Bitcoin Active 2.0 enables prospective investors to bring this promising strategy into their portfolio at low cost. Despite the elaborate process, the product comes with an annual fee of just 1.5%. The tracker also has an open-ended structure, allowing holders to choose their investment period to suit.

Active management in “mini” format

Alongside the Swissquote Bitcoin Active 2.0 Index, Leonteq also has a “smaller” version to offer: the Bitcoin Active 2.0 Mini certificate (ISIN CH0596607769). This likewise aims at mitigating volatility while at the same time profiting from the short upticks in the sector, which it does by boosting cash holdings in times of uncertainty and downturns so that more consistent earnings can be achieved in the long term. The only risks are in Bitcoin and cash: between 60% and 100% of the portfolio is invested in Bitcoin, depending on the market conditions and confidence, with the rest of the capital being held in Swiss francs. Although the product has been in negative territory since it was issued almost exactly two years ago, the loss is not as great as that suffered by the most valuable virtual currency in the world. While Bitcoin has dropped by a little more than a fifth, the Bitcoin Active 2.0 Mini certificate has shed only around 13% of its value. The product also has an unlimited term, and the fees for active management (1.00% p.a.), calculation of the index (0.35% p.a.) and rebalancing (0.15% p.a.) correspond to those of the maxi version.

Advantageous certificates

The trackers combine a number of advantages. For one thing, investors have the best protection against theft, a key consideration given that holders of Bitcoin often fall victim to cyber criminals. The certificates, though, offer protected and convenient access to the crypto asset because the security is held securely in the portfolio of your house bank as usual. Furthermore, the two Bitcoin indices brought into being by Swissquote are better protected against fluctuation, which will continue to be an important factor going forward. That is because current regulatory efforts could have a considerable impact on both the value of digital currencies and the operation of crypto exchanges.

Chartvergleich Swissquote Bitcoin Active 2.0 Index vs. Bitcoin

Chartvergleich Swissquote Bitcoin Active 2.0 Mini Index vs. Bitcoin

Legal Disclaimer

This document constitutes Advertising within the meaning of article 68 of the FinSA.

This publication serves only for information purposes and is not research; it constitutes neither a recommendation for the purchase of financial instruments nor an offer or an invitation for an offer. No responsibility is taken for the correctness of this information. Investors bear the full credit risk of the issuer / [guarantor] for products which are not issued as COSI® products. Before investing in derivative instruments, investors are highly recommended to ask their financial advisor for advice specifically focused on the investor´s financial situation; the information contained in this document does not substitute such advice.

This publication does not constitute a simplified prospectus pursuant to art. 5 CISA, or a listing prospectus pursuant to art. 652a or 1156 of the Swiss Code of Obligations. The relevant product documentation can be obtained directly at Leonteq Securities AG via telephone +41 (0)58 800 1111, fax +41 (0)58 800 1010, or via email termsheet@leonteq.com.

Selling restrictions apply for the EEA, Hong Kong, Singapore,the USA, US persons, and the United Kingdom (the issuance is subject to Swiss law).

The Underlying’s performance in the past does not constitute a guarantee for their future performance. The financial products' value is subject to market fluctuation, which can lead to a partial or total loss of the invested capital. The purchase of the financial products triggers costs and fees. Leonteq Securities AG and/or another related company may operate as market maker for the financial products, may trade as principal, and may conclude hedging transactions. Such activity may influence the market price, the price movement, or the liquidity of the financial products.

Insofar as this publication contains information relating to a Packaged Retail and Insurance-based Investment Product (PRIIP), a Key Information Document in accordance with Regulation (EU) No 1286/2014 (PRIIPs Regulation) is available at https://www.priipkidportal.com/

Any - including only partial - reproduction of any article or picture is solely permitted based on an authorization from Leonteq Securities AG. No responsibility is assumed in case of unsolicited delivery.

© Leonteq Securities AG 2023. All rights reserved.