By Silvano Grimaldi, CEO of the independent asset management firm Grimaldi & Partners AG.
Monthly Review
International equity markets ended April 2024 with losses.
Factors Weighing on Markets
- Reduced expectations of rapid interest-rate cuts: Given the resilience of the US economy, hopes of an early easing of monetary policy by the Federal Reserve diminished.
- Persistently high inflation: Investors remained concerned that inflation could stay elevated for longer than expected.
- Rising bond yields: The continued increase in bond yields placed additional pressure on equity markets.
- Higher US labour costs: Labour costs in the United States rose more sharply than expected at the beginning of the year.
- Stronger US house-price growth: US house prices increased more significantly than anticipated.
Stock in Focus
Novartis Surprises with Strong Results and Names Its Next Chairman
Following a strong start to 2024, pharmaceutical group Novartis raised its targets for the full year.
The company also announced that it had already selected a successor for the chairmanship of its Board of Directors for the following year.
Growth was supported by medicines including:
- Entresto, for heart disease
- Cosentyx, for psoriasis
- Kesimpta, for multiple sclerosis
- Kisqali, for breast cancer
- Pluvicto, a radioligand therapy
- Leqvio, for cholesterol management
Novartis generated operating profit of USD 3.4 billion during the first quarter, representing an increase of 29%.
Net profit reached USD 2.7 billion, compared with just under USD 2.2 billion during the same period of the previous year.
According to the company, this improvement was primarily driven by its stronger overall business performance.
Following the positive start to the year, Novartis raised its full-year guidance for 2024.
Revenue at constant exchange rates is now expected to grow within the high single-digit to low double-digit percentage range.
Previously, the company had forecast growth in the mid-single-digit range.
Core operating profit is now expected to increase within the low double-digit to mid-teens percentage range, compared with the previous forecast of high single-digit growth.
Outlook – May 2024
Key Market Factors
- Inflation and long-term interest rates: Persistently high inflation and the renewed increase in long-term US interest rates placed pressure on equity markets.
- Easing geopolitical concerns: The absence of further escalation in the conflict between Israel and Iran provided some relief to investors.
- Resilient artificial-intelligence investment cycle: Quarterly results from major US technology companies confirmed that the current artificial-intelligence boom remains supported by solid fundamentals.
- Healthy market consolidation: A period of consolidation following the rapid gains recorded at the beginning of the year could be constructive for the remainder of 2024.
- Expectations of stronger economic growth: Many investors continued to anticipate an acceleration in economic growth during the second half of the year, providing support to equity markets.
Performance Expectations
For May 2024, we expect a slightly positive trend in international equity markets.
Stock Recommendation: Novartis
This publication is provided for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument. Past performance is not indicative of future results.
