By Silvano Grimaldi, CEO of the independent asset management firm Grimaldi & Partners AG.
Monthly Review
International equity markets ended December 2024 with slight losses.
Factors Weighing on Markets
- Reduced expectations of interest-rate cuts: The Federal Reserve indicated that it expected fewer interest-rate cuts in 2025 than markets had previously anticipated.
- Persistent inflation concerns: Inflation risks remained elevated, particularly because of the tariffs proposed by Donald Trump.
- Rising bond yields: The yield on the 10-year US Treasury bond traded at approximately 4.6%.
These factors weighed particularly heavily on European equity markets.
Stock in Focus
Lonza Plans to Divest Its Capsules and Health Ingredients Business
Lonza announced new medium-term targets and plans to withdraw from its Capsules & Health Ingredients division, allowing the company to focus more strongly on its core business as a contract development and manufacturing organisation — CDMO.
The sale process is expected to become more concrete during 2025.
The division had previously been regarded as a reliable cash-flow generator, but it diluted Lonza’s overall growth profile.
For 2024, the company expected flat revenue development and an operating profit margin in the high-20% range.
From 2025 onwards, Lonza is targeting revenue growth of approximately 20%, with a margin close to 30%.
Over the longer term, the company expects low single-digit organic growth and a disproportionately strong improvement in margins.
In summary, by concentrating on its CDMO business and divesting the CHI division, Lonza aims to achieve stronger growth momentum and improved profitability.
Outlook – January 2025
Opportunities
- Solid economic data: Positive GDP growth, resilient labour-market figures and strong corporate earnings could improve market sentiment.
- Central-bank policy: Indications of interest-rate cuts or continued accommodative monetary policy from the Federal Reserve, the ECB or other central banks could support equity markets.
- Technological breakthroughs: Progress in areas such as artificial intelligence, quantum computing and green technologies could benefit companies operating in these sectors.
- Lower energy prices: Falling oil and gas prices could reduce corporate costs and support consumer demand.
- Geopolitical easing: Positive developments in conflict regions or progress in trade negotiations, particularly between the United States and China, could reduce market uncertainty.
- Strong demand for emerging markets: Improved growth forecasts could encourage additional capital flows into emerging-market assets.
- Regulatory relief: Reduced bureaucracy or tax incentives for companies in key industries could support corporate investment and profitability.
Risks
- Higher interest rates: Restrictive monetary policy could increase borrowing costs and slow economic growth.
- Inflationary pressure: Unexpectedly high inflation figures could create renewed uncertainty among investors.
- Geopolitical tensions: Escalation in conflict regions or new trade disputes involving the United States, Europe or Taiwan could negatively affect markets.
- Recession concerns: Weaker growth forecasts, particularly in the United States or China, could weigh on investor sentiment.
- Stricter regulation: New regulatory measures in important industries such as technology and energy could negatively affect corporate earnings.
- Cryptocurrency-market volatility: A sharp decline in Bitcoin or other cryptocurrencies could trigger a broader market correction.
- Energy crisis: Unexpected supply shortages or a sharp increase in energy prices caused by geopolitical or climate-related factors could place pressure on markets.
- Natural disasters: Extreme weather events such as storms, floods or droughts could negatively affect specific regions and sectors.
Performance Expectations
For January 2025, we expect a sideways trend in international equity markets.
Stock Recommendation: Bitcoin
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.
