Market Commentary August 2019

Uncertainties regarding the ruling trade war, the political crisis in Europe – especially in Italy – and the continuing fears of recession dominated the headlines in August. The indirect real estate market was additionally influenced by the expectation that a further rate cut in Europe and Switzerland will become more likely in September. Compared to 2015, when no one had really anticipated negative interest rates, expectations are so strong right now that even an alternative scenario could lead to disappointment. What’s wrong with the different asset classes, do investors still know what they are doing? In the past, you held stocks to make capital gains, today you buy stocks for the return and bonds for the capital gain, since there you don’t get fixed income anymore. This also distorts the picture of real estate investments. There are rather hopes for gains on new IPOs and by expected further reductions in the discount rates. The currently above-average high vacancy rates and stagnating rental prices seem to interest the investors only a little. The new, weighty offers of the Swiss insurance companies are continuing their way. Baloise well placed their CHF 200 million and was able to provide new investors with a 50% allocation. Then also Zurich insurance announced a capital increase over CHF 330 million for September, the competitor Swiss Life was not long waiting aside and announced last week, the reopening of their foundation and looking for another CHF 650 million. What numbers, what a development in the past 12 months. There will be a lot going on in the exchange traded funds in September. Now Credit Suisse announced that they are planning to raise new money for its CS Green Property Fund. However, times have become more difficult for some properties, such as the “Ambassador-House” on Thurgauerstrasse, where CS and UBS are struggling to occupy the property. According to the semi-annual report of UBS SIMA, only 50% were let by end of June. This confirms our impression that investors are currently not relying on fundamental aspects. This situation seems to be slowly becoming normal. So we will sooner or later have to answer for the consequences of the increasing risks, the only question is when.