December rally continues this week for SMI

SMI

2016’s December rally continued this week as Swiss and European equities outperformed global stocks. The US dollar continued to surge after the Federal Reserve increased interest rates for only the second time in a decade on Wednesday.

SMI Index, December 16

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Economic Data

Fed Head Janet Yellen told reporters that inflation expectations have risen ‘considerably’ on the back of Donald Trump’s election win in November but added that the economic outlook remained “highly uncertain.” Yellen said that the 0.25% increase of the key rate to 0.5% was only a “modest shift” and that the central bank expected to continue with only gradual rate increases in the short term.

SMI vs. MSCI World

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SMI vs. MSCI World Week, December 16

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Swiss Economic Data

In addition to the stronger dollar, diverging monetary policy on either side of the Atlantic made headlines again this week. While the Federal Reserve tightened monetary policy on Thursday, the Bank of England kept its key rate at a record low of 0.5%. The Swiss National Bank also left the deposit rate at minus 0.75 percent as it battles to keep the Swiss franc stable. This comes a week after the European Central Bank extended its quantitative easing programme until December 2017, citing the multitude of political uncertainties that Europe still faces.

Swiss Bonds and FX

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Swiss Companies

In company news, Swiss recruitment firm Adecco led Swiss Market Index gains this week after it announced that it had spun off its Beeline staffing software business into a new company. Actelion Ltd was the week’s biggest SMI loser after US consumer conglomerate Johnson & Johnson abandoned its pursuit of the Swiss pharma company. It was later reported that the company may still be on the market with the company apparently now in talks with French drug giant Sanofi SA.

Swiss Companies

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