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The market at a glance: That’s the way of the world

Friday, February 9

In this February issue, join Victor Cianni, Alpian's Chief Investment Officer, as he navigates the twists and turns of January 2024's market trends following the rhythm of one special song. Step into a space where numbers meet music, and let Victor guide you through the insights of January with the warmth and clarity only he can deliver. To listen to the song of the month, you can follow our Spotify playlist.


Here is a conviction I deeply hold: If the world listened to more funk music, there would probably be more peace.  

While I have no evidence to support this claim, I can offer an experience: Sit comfortably in your chair, select the song we've picked for this month, and turn up the volume. If you feel like starting a fight after that, then I am ready to offer you a massage!  

Our pick of the month is none other than That’s the way of the world by Earth, Wind & Fire (I personally love the version by Ramsey Lewis). This classic from the iconic band, released in 1975, perfectly blends various music styles prevalent in the 1970s, resulting in a soulful masterpiece.  

Although the world currently needs more funk, with ongoing conflicts affecting many lives, one reason we chose this song is also as a nod to what's happening in the markets right now. 

Market at a glance: That’s the way of the world 

Key takeaways  

  • Overall, the beginning of the year offered a mix for everyone: positive and negative returns, good and bad news, surprises, and unmet expectations — in short, nothing different from the usual ways of the markets. 

  • Equity markets, after initial struggles, soared to new highs across the globe, driven by optimism in sectors like tech, with China being the only exception. 

  • Bond markets reflected caution, with declines due to central bank actions and delayed interest rate cuts. 

  • Commodities showed unexpected stability amidst geopolitical tensions, evidencing market adaptability and demand shifts. 

  • Digital assets disappointed. Bitcoin prices doubled in anticipation of the long-awaited SEC's approval for crypto ETFs in the U.S., leaving little room for post-announcement gains. 

Against all odds, 2023 turned out to be a rather good year for most assets.  

Towards the end of the year, central banks gave the markets a boost by announcing a long-awaited pause in their actions to curb inflation. The prospect of ending the high-interest-rate regime delighted investors, who rushed to buy assets, pushing prices higher. Perhaps too high, too fast, and indigestion was somewhat expected. Central bank comments in January tempered the enthusiasm: Interest rate cuts won't happen immediately. Now, the most pessimistic forecasters are returning with their usual complaints: Something could "break" in the economic machine if rates stay high for too long. 

Yes, history has shown us on numerous occasions that components within the economy can fail: The financial sector in 2008, European countries in 2010, etc. However, we must also recognise that more often than not, economies don't "break". The theory of System Dynamics provides good reasons why. Any complex system, including economies, possesses three characteristics: Resilience, self-organisation, and hierarchy. 

Consider this: Before reaching a point of no return, systems can exhibit resilience (companies can adjust their budgets, consumers their preferences, etc.), self-adapt (high interest rates are detrimental for investors who need to borrow money but not for those lending... that's why we saw money rushing into money market funds), and rely on key sectors (such as AI, the ETF industry, etc.).  

There are obviously limits as to how much the system can be pushed before it breaks, but are we really that close to that point, or are we merely witnessing a system that is finding its way through constraints? Tortuous but always forward, isn’t that the way of the world? 

Let's review some of the action in detail:  

What happened with equities 

 Like many post-holiday seasons, equity markets initially struggled in January before hitting new highs.  

The US markets, propelled by consumer discretionary and tech stocks, achieved an all-time high. It looks like investors are ready to overlook any signs of weaknesses in companies’ earnings (that overall grew in the last quarter) and are willing to invest in higher-valued companies.  

European shares also hit a two-year high and Swiss stocks joined the broader trend.  

In Asia, the mood was mixed. Japanese stock markets continued what seems to be an unstoppable revival, thanks to economic reforms and efforts by the Japanese Central Bank to create a virtuous cycle. Chinese stocks on the contrary went down, despite the authorities’ efforts to stabilise markets. Investors' expectations for significant monetary and fiscal stimulus measures were met with a more measured response from the Chinese government. 

What happened with bonds 

If stock markets were content with the fuller part of the glass, bond markets were focused on the half-empty part. Their fate now seems still largely dependent on the actions of central banks, and central bankers failed to deliver sufficiently positive news.  

Immediate interest rate cuts are not forthcoming, and volatility is the result of market speculation on timing. Nearly all fixed income markets have declined since the beginning of the year, with longer dated assets leading the pack.  

What happened with commodities, currencies, and digital assets  

The commodities market's reaction to escalating tensions in the Red Sea, which affects a crucial global trade route, was unexpectedly muted, with prices of oil, gas, and agricultural commodities remaining stable. This stability could be attributed to the market's resilience and ability to self-organise. Over time, the global freight system has learned to deal with local events, and we also saw demand adjusting in Europe and China. 

On the currency front, the Swiss franc lost some ground against the Euro and the USD, although for now, the long-term trend seems intact. 

Finally, we need to discuss the latest developments on the cryptocurrency front. 

Despite the SEC's approval for crypto ETFs in the U.S., prices didn't surge as expected. Is this really this surprising? In many ways, the event can be compared to an IPO. When a company goes public, the performance in the following months tends to be disappointing, and for a good reason: A good portion of the value has been extracted before. Indeed, the price of bitcoin had nearly doubled in anticipation of this approval, how much juice was left? A classic example of what a system thinker would call a “balancing loop”. 

Overall, the beginning of the year offered a mix for everyone: Positive and negative returns, good and bad news, surprises, and unmet expectations — in short, nothing different from the usual ways of the markets. 

Demystification room: What are taxes used for in Switzerland? 

Taxes are surely part of the way of the world. Although market predictions for the year are uncertain, one sure thing is that taxes will be due.  

With tax season upon us, and Alpian providing thousands of tax reports to its clients for free, it's timely to focus on this topic in our newsletter.  

Taxes may not be enjoyable, but they're essential for a functioning society.  

Ever wondered how tax revenues are utilised in Switzerland? The chart below offers insight, possibly making it easier to accept this necessary duty. 

Revealing the mystery of how digital assets are taxed 

And speaking about taxes, how does it work when it comes to digital assets? Investing in assets like NFTs, AI-generated art, and cryptocurrencies has become universally accessible. But many people don’t know how their taxation actually works. We turned to Trang Fernandez-Leenknecht, a sage in digital assets and tax law, to clear the fog. Dive into our discussion to navigate the intricate intersection of virtual wealth and (very) real-world tax regulations. Read it here.

Friday, February 9
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