The market at a glance: Bump in the road

Financial markets don't seem to fall short of action this fall. The bumpy roads they ventured upon might not be to all investors’ taste, but that’s part of the game. As usual we’ll cover the latest economic developments in our market at a glance section.  

 This month, we will also attempt to decode an event that has generated much attention in recent news: The battle between the US market regulator and the crypto industry, in our "Demystification Room" section. 

Lastly, because our schedule is as packed as the markets themselves, we would like to share exciting news and upcoming events 

We hope you enjoy the read! 

Market at a glance: Bump in the road

What about a bit of blues-rock when life gets tough? For this month's edition, we've chosen "Bump in the Road" by the blues guitarist and songwriter Jonny Lang. This blues-rock anthem opens with powerful guitar riffs that perfectly illustrate the ups and downs of bumpy roads. The lyrics also call for resilience and determination in the face of adversity, which is exactly what we needed, as the financial markets' roads in October have been bumpy, to say the least.  

One of the highlights of the month was the outbreak of war between Israel and the Hamas. The tragic events in the Gaza Strip add uncertainty to an already tense geopolitical context.  

It always feels inappropriate to talk about the economic dimensions of wars when lives are at stake, especially as markets tend to quickly discount the consequences of wars and move on, while conflicts tend to last years. But it was one of the factors, among others, that drove stocks down in October. This is in addition to the usual suspects: Prospects of slower growth, inflation, and higher rates for longer.  

Markets’ attention was also focused on the earning season. Companies started reporting their financial results for the third quarter and investors are anxiously looking for signs of fragility.  

The health of economies is premised on strong companies and confident consumers. Over the past years, despite formidable economic challenges, businesses have shown resilience. So far, companies seem to hang on as we saw markets strongly rebounding these last trading sessions. This seems to indicate that, at least, some investors are willing to buy during times of weakness.    

The action in debt markets was interesting too. For a moment, long-term interest rates reached a peak. As a reminder, if central banks dictate where short-term interest rates should be — which has an impact on our saving accounts, for example —, the level of long-term interest rates — if central banks don’t put controls in place — is usually subject to the forces of supply and demand. And investors seem to be demanding higher rates for lending their money for longer periods of time. Higher rates continue to be a challenge for fixed-income portfolios, but we remain convinced that there will be opportunities down the line for bondholders. 

Some assets benefited from the nervousness: Gold regained some luster, commodities went up, and digital assets took advantage of the situation. 

The big winner of the month was Bitcoin, and we are quite happy to have increased our position in portfolios before the takeoff.  

Was it the rumors of the US financial regulator finally taking cryptocurrencies seriously, or the fact that digital assets held up well in comparison to equities that triggered the move? It's hard to say, but that extra performance was most welcome. Our main investment thesis around this move is that digital assets are being adopted more broadly by institutions and this should push prices higher. 

All in all, this past month was a crash course on asset allocation and portfolio management. October reminded us that bumps are part of the investment journey, and the first days of November were a reminder that trying to time the markets can be costly. For us, the great lesson remains that diversification and patience are key. 

Demystification room: SEC, the three letters that make the news. 

Cryptocurrencies have rallied this week on speculation that the Security and Exchange Commission (SEC) would approve a new Bitcoin Exchange Traded Fund (ETF). What is the SEC, and why is its approval needed to launch a new product? 

At the core of any sound financial system, there are laws in place to ensure the proper functioning of financial markets and to protect participants. Typically, there is a supervisory authority responsible for enforcing these laws. In the United States, this role is fulfilled by the SEC, while in Switzerland, it's the responsibility of FINMA.  

 The SEC has three primary mandates: 

• Inform and protect investors: Anyone purchasing securities in the markets, whether it's shares of a company like Apple or mutual funds, needs to be adequately informed and aware of the investment risks they are undertaking. 

• Maintain fair, orderly, and efficient markets: This is a complex task as the SEC oversees more than $100 trillion in security trading annually. 

• Facilitate capital formation: Capital markets exist to allow companies and entrepreneurs to raise capital and drive economies. 

When it comes to the launch of new financial products, the SEC ensures that these products comply with existing laws.  

To launch an ETF, a financial institution must submit an application to the SEC. If the application is approved, the institution can proceed to create and offer the products. While this may seem like a formal process, it's worth noting that there are nearly 3,000 ETFs in the United States, with assets totaling almost $10 trillion.  

These facts make the rejection of the Bitcoin ETF submission quite unusual, so unusual that the case has been taken to court. The reasons cited by the SEC align with its mandates: It points to the lack of protection in the crypto industry and argues that Bitcoin is not theoretically a security.  

 In the end, each regulator has its own stance. In Switzerland, FINMA has already approved a Bitcoin ETFs.

Upcoming webinar: "Smart finances: How to choose the right bank for you?"

Join us on November 30th at 12:30 for a free webinar with Alpian's Deputy CEO, Marion Fogli, and moderated by Olga Miler, CEO and Co-Founder of SmartPurse. The topic is nothing short of important: "How to choose a bank that works for you and supports your growth."

In this session, Marion Fogli will explore the key criteria for making this crucial (and often overlooked) financial decision, including the important factors to pay attention to and the pitfalls to avoid. In addition, you’ll be able to learn more about Alpian’s mission from one of its founders.

Key details:

• When? November 30th, 2023 at 12:30

• Where? Streaming live on SmartPurse - Financial Education Platform

• Cost? Completely free

Don't forget to mark your calendars and register here.

News of the month: Alpian Pulse is coming soon.

Santa Claus is coming earlier this year and soon, Alpian will be making a great announcement for those aged between 18 and 25. Get ready for Alpian Pulse, our new service designed for the next generation – simple, smart banking that grows with you. Stay tuned!