Review of BörsenTalk 2022 – Which Themes are Driving the Markets?

The event included four high-profile panels, which were held either on location at SIX ConventionPoint or via webcast. These featured a number of specialists invited by SIX Swiss Exchange to discuss macroeconomic trends, ESG integration into investment strategies, the opportunities and challenges presented by cryptocurrencies as well as the activities and benefits of so-called “Finfluencers”. The keynote speech given by Vice Chairman of the Swiss National Bank Dr. Fritz Zurbrügg and subsequent fireside chat shed further light on the core activities of the SNB and how it deals with creative ideas on how to use the Bank’s profits. Recordings of the individual parts of the program can be found further down and on the BörsenTalk event page.

The Economic Roundtable began by addressing the question of whether central banks still have inflation under control. The views of the experts on this were somewhat nuanced: While interest rate hikes can do nothing to combat high oil prices and product costs rising as a result of supply bottlenecks, central banks can still take corrective action by curbing economic demand. This is what will now also happen in both the US and Europe. While opinions differ as to whether the SNB will even increase interest rates before the ECB, the experts agreed that the Swiss franc is unlikely to appreciate considerably in the foreseeable future – unless there is a significant escalation of the conflict in Ukraine.

The experts did not believe Europe to currently be entering a phase of stagflation. While we will have to come to terms with somewhat higher rates of inflation, long-term inflation expectations are currently lower than was previously the case during past major recessions. This – the panel believes – shows that central banks are managing the situation better. Furthermore, Europe is showing no signs of major economic imbalances, an excessive investment boom or huge levels of private debt, all of which were indicators of past recessions. For Switzerland, the major issues will not apply to the market in general. Rather it will be more interesting to see how the individual companies deal with the situation themselves. Investors cannot expect to see a general V-shaped recovery; however, we could be seeing the first signs of the market bottoming out. The experts believe that at present, investors should stick to a long-term plan.

Based on SIX Swiss Exchange’s direct experience, ESG – that is to say environmental, social, and governance criteria – is becoming ever more important. The panel of experts were of the view that in recent years, companies have paid greater attention to ESG, not least because ESG is now better defined and structured, making the topic much more tangible. They discussed how the theme is, nevertheless, also subject to fluctuations caused by current events, for example the war in Ukraine causing oil and gas stocks to recently outperform ESG-focused products. According to the panel, however, society will inevitably reduce its dependence on fossil fuels over the long term, and the war in Ukraine has simply accelerated decision-making in this regard.

The experts believe that Switzerland is at an advantage thanks to its hydropower capabilities. They also believe that nuclear power, which nowadays employs far more advanced technologies than 50 years ago, is also an interesting option. The experts agreed that pressure from investors will continue to give greater weight to ESG, particularly because ESG-focused investments are already outperforming traditional investments over the long term. The panel went on to highlight that while Europe is the global leader when it comes to ESG and solid regulations are in place, they could still be somewhat tighter. This trend is also reflected at companies and in their sustainability reporting, with investors and legislators being noticeably less impressed by glossy brochures.

While the experts ultimately disagreed over whether a four-day week would be a good idea, there was clear agreement over the fact that all three letters of ESG will influence investment decisions going forward. Evidence of this can be seen in Tesla’s exclusion from the S&P 500 ESG index: Failures when it came to social and governance issues were seen to be more important than any contribution the electric car manufacturer makes towards reducing CO2 emissions.

The first ETF was listed on the Swiss stock exchange more than 20 years ago - today there are almost 1600 ETFs listed. In addition, SIX Swiss Exchange recently heralded the future of ETF trading with "Quote on Demand", the new order book for trading in ETFs and ETPs. But first, a look back: during the crisis of the past months, major dislocations in ETFs were largely absent and spreads were tighter than for the underlying assets. Although it was a challenging year, ETFs held up well, which was also reflected in the exceptionally high liquidity. The ETF market is moving strongly. The panel experts find it positive that new products are coming to market that allow investors to diversify away from purely passive ETFs, which for a long time were simply structured according to the market capitalisation of large companies. The size of the products does not play the central role. Equally important are trading volumes, open platforms, transparency or - in the case of complicated trades - proximity to capital market experts.

Basic education in Switzerland does not cover a great deal about financial matters, and when it does, it is very dry. This is what drove all of the financial influencers – or “Finfluencers” – on the panel to pursue their activities. Many simply slipped into the role because they themselves realized they did not know enough about financial matters and noticed that they were not alone. Especially when starting out as Finfluencers, it tends to be the case that they write and talk about those financial topics they are interested in. The topics they address highlight the fact that the Swiss general public is interested in local financial issues and that they want enthusiastic, easy-to-understand answers.

Finfluencers are filling in the gaps when it comes to the general public’s financial expertise or lack thereof. And they are increasingly doing so on behalf of companies who have noticed that these Finfluencers can reach target audiences that they otherwise cannot. A key point for all Finfluencers is that there must be transparency if they are paid for a certain contribution. Many Finfluencers are paid enough that they can earn a living through their work, but the many interactions require a great deal of energy and stamina on their part, not least because certain topics are requested again and again.

When asked about what they would like to see in the financial sector, they had the following to say: There is a lack of cheaper products for beginner investors. Fees are just too high for those with smaller investment budgets. And women frequently want a more educational approach to investment advice. They would prefer to understand the investments and the mechanisms behind them, rather than simply be shown a range of products to choose from.

In his keynote speech, Fritz Zurbrügg looked at the current economic situation in Switzerland and throughout the world from a macroeconomic perspective. Following the pandemic, the global economy is still on the road to recover; however, the outlook has soured somewhat since January. He explained that greater levels of uncertainty were macroeconomic poison, and that this is the first time that central banks are having to deal with supply bottlenecks. Real incomes are falling because of inflation caused by post-pandemic growth, the war in Ukraine, supply bottlenecks and the nominal appreciation of the franc.

The SNB does not expect a sustained period of high inflation because, for example, energy prices and supply bottlenecks would have to develop at the same pace as in the last year or a wage-price spiral would have to emerge. The SNB is paying attention to these drivers. Zurbrügg believes that the Swiss financial system is well positioned for the future. However, he is concerned that an entire generation has forgotten the regressive and significant impact that inflation has, in particular on low-income households.

Both in his speech and subsequent discussions, he emphasized the SNB’s primary objective on a number of occasions: To ensure price stability. He explained that this must take priority over other ambitions, whether this is demands for emancipation from the ECB, for a direct, extraordinary distribution of SNB profits, for a sovereign wealth fund or for targeted action on climate change. With ESG criteria in particular, he is always surprised at the sometimes naive approach towards the complexity of the topic.

SIX Swiss Exchange would like to thank all the speakers for their valuable insights, inputs and opinions. Don’t forget: The next BörsenTalk will take place in June 2023 – put the date in your diary now! 

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