Friday, 15 November 2024 Reading time : 3 minutes

Investors who moved into US equities at the beginning of the year have enjoyed a good year so far. The US blue-chip index S&P 500 has gained almost 27% year-to-date, outperforming the stock markets of other industrialised countries*. The EuroStoxx 50, for example, has gained 8.1% over the same period, while the SMI is up 8.5%.

One reason for the outperformance of US equities are the technology stocks which are benefiting from the boom in artificial intelligence: the shares of the ‘Magnificent Seven’ – Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla – have gained almost 60% in value since the beginning of the year. The latest rally on Wall Street was triggered by the election of Donald Trump as the 47th President of the United States in early November. In the days that followed, the S&P 500 climbed as much as 5%, closing above 6,000 for the first time in its history.

Whether this rally will continue in the coming months, however, is uncertain. For investors who do not quite trust the stock market rally but still want to participate in the upside potential of the US stock markets, the ZKB Capital Protection Note on the S&P 500 may therefore be of interest. The capital-protected product is a so-called shark note, which owes its name to the payoff profile, which resembles a shark's dorsal fin. In addition to 100% capital protection, the shark note on the S&P 500 features a knock-out barrier of 120% and a rebate of 5%. How the individual components interact is explained hereafter:

• 100% capital protection at maturity
  The capital protection corresponds to 100% of the nominal value of the product and applies at maturity. During the lifetime of the product, as with bonds, price fluctuations may occur and the product's price may fall below the capital protection level. Investors participate fully in the upside of the S&P 500, provided the knock-out barrier is not reached during the lifetime of the product. The upside potential is therefore limited, but in return the capital invested is protected compared to a direct investment in the index.
  
  
• Limited participation: knock-out barrier
  Investors participate fully in the performance of the S&P 500, but this participation is limited. This is where the knock-out barrier comes in, which for this product is 120% (measured at the initial fixing): if the price of the S&P 500 exceeds this barrier during the lifetime of the product, the investor no longer participates in the index's performance. The capital protection at maturity is maintained. In addition, investors receive a 5% rebate in the event of a knock-out.
  
  
• Attractive additional feature: rebate 
  The rebate is similar to a coupon payment and is triggered if the S&P 500 rises above the knock-out level of 120% during the term. In this case, the redemption at maturity will be equal to the capital invested plus the 5% rebate. This means that investors will still receive a return even if a knock-out event has occurred and they are no longer able to participate in the performance of the underlying. If the knock-out barrier is not breached, the rebate will not be paid.

The ZKB Capital Protection Note on the S&P 500 is suitable for investors who believe that the S&P 500 will go up, but do not expect a price explosion in the coming months and want to eliminate the risk of capital loss. However, the product is not suitable for investors who expect the S&P 500 to rise sharply or to have temporary upward spikes. It is always the investor's expectations that determine the investment decision.

*All performance data as of 13 November 2024, incl. dividends

The product is traded on the secondary market under the Valor 134141568.

 

Disclaimer
This communication is for marketing purposes. It is neither an offer nor an invitation to submit an offer, to purchase or to subscribe to securities and does not constitute investment advice. You should consult your advisors before making an investment decision. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, financial condition, development or performance of the issuer to be materially different from any future results, financial condition, development or performance expressed or implied by such statements. The present document has not been drawn up by the research department as defined in the rules of the “Directives on the Independence of Financial Research” published by the Swiss Bankers Association, hence these rules do not apply to this document. If securities are mentioned in the communication, the base prospectus, the final terms and any key information document may be obtained free of charge from Zürcher Kantonalbank, Bahnhofstrasse 9, 8001 Zurich, VRIS, and from www.zkb.ch/finanzinformationen.
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