Monthly Report May 2025

Market development in May 2025

A temporary de-escalation of the trade conflict led to a significant recovery in international equity markets in May. The broad Swiss equity market was held back somewhat by the modest performance of heavyweight index components Nestlé, Roche, and Novartis, and rose by 2.3%. The DAX recorded a gain of 6.7% in EUR, while the S&P 500, the MSCI World Index, and the MSCI Emerging Markets Index increased by 6.3%, 6.0%, and 4.3% respectively in USD.

The US Federal Reserve left interest rates unchanged but signaled a possible rate cut in the fall. After a strong upward trend earlier this year, the gold price moved sideways, while the oil price rose by 4.7% in USD due to unexpected OPEC+ production cuts and the easing of trade tensions.

Trade conflict remains the dominant topic

After intensive negotiations in Switzerland, a surprising agreement was reached on May 12 between the US and China to reduce reciprocal tariffs for a period of 90 days from 115% to 30% on Chinese imports and 10% on US imports. Both sides commented positively on the outcome and emphasized that they wish to continue trading with each other.

US Treasury Secretary Scott Bessent stated that the US seeks greater balance in trade and that both parties are determined to achieve this.

Towards the end of the month, the US Court of International Trade in New York declared the tariffs imposed by the new US administration invalid. The president had exceeded his authority by imposing tariffs across the board on imports that exceeded US exports. The affected tariffs were "lifted and their application permanently prohibited." The US government immediately appealed the decision.

Shortly after, an appeals court temporarily allowed US President Trump to continue imposing tariffs under an emergency powers act. However, the appeals court has not made a final decision in the matter yet. The government could still win this case at this level; if not, the case could reach the US Supreme Court.

Fund and mandate performance

In this positive market environment, all Format funds and mandates recorded positive performance — with the exception of Global Bonds (F), which posted a small decline of -0.2% (still outperforming its benchmark by 0.5%). All other funds and mandates outperformed their respective benchmarks. The strongest performer was Swiss Mid & Small Cap Equity (F), achieving a monthly return of 9.1% (Benchmark SPI Extra: 6.2%). Performance year-to-date for the funds and mandates can be accessed via the link below. Among the holdings in the Format equity portfolios, the standout stock in May was Dottikon, which posted a monthly performance of 40.5% following the announcement of a very strong annual result.

Outlook

The OECD has further lowered its global economic growth forecast for 2025 and 2026 to 2.9% (previously 3.1% and 3.0%) due to the expected effects of the trade conflict.

In the coming weeks, investors will closely monitor not only further developments in the trade conflict but also the latest data on labor markets and inflation. Accordingly, markets are expected to remain somewhat volatile.

Best regards,
Matthias Hug and Markus Lackner

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