CIO View June 2023
Stock market highs collide with dark economic clouds: how does Tareno position itself as an independent asset manager in client portfolios?
The bad economic news just keeps coming: Negative year-over-year growth in money supply, the sharpest rise in interest rates in decades, tighter lending standards for businesses, but also various other indicators such as business climate indicators or the inverted yield curve on both sides of the Atlantic are lowering dark clouds over the economy. Even the anticipated boom for the global economy, following China’s reopening is fizzling out much faster than originally hoped for. It seems to have served the domestic market rather than the global economy.
What are equity markets making of this?
The Dax is trading at an all-time high and the US indices have posted double-digit gains since the beginning of the year – all thanks to 7 stocks. This leaves everyone and their dog puzzled.
Do you have any questions?
We are happy to assist you and our author Gregor Taraszow, Head Portfolio Management and CIO is always available for questions and explanations.
How do these observations fit together and where is the market headed from here?
The positioning of professional investors is certainly one reason for the bull market: Recession forecasts for Europe and the U.S. have long been a topic in investment bank outlooks and daily newspapers. The eurozone has already followed Germany into an official technical recession. Switzerland, on the other hand, seems – as is often the case – to be the last Gallic village to escape an economic downturn. For all other countries, the situation looks much worse. The data are available to all market participants and are quite clear. Accordingly, many market participants are cautious. Even the more optimistic analysts do not expect a US recession in 2023, but in 2024. The reason for the later start is the huge amount of money that Americans saved during the Corona pandemic and are still drawing on: Based on government aid payments and business closures, it is estimated that American households saved up to $2.4 trillion during the pandemic, of which $1.3 trillion remains. That could keep the consumer-driven U.S. economy out of recession this year, analysts say.
So how do you invest your money in these times?
While it may seem boring to follow the financial market consensus, we at Tareno also believe that it is time to become more defensive: Within the asset allocation, this can be done by partially hedging equities (volatilities are low again and hedging is therefore cheap) or by underweighting equities. Within equities, we prefer defensive stocks that hold their value. On the other hand, some stocks in the artificial intelligence sector remind us of the dotcom bubble with price-to-sales ratios above 35 – we avoid these stocks not only despite, but also because of the hype. On the other hand, compared to recent years, there are alternatives to stocks again: TARA (there are reasonable alternatives) has long since replaced TINA (there is no alternative). Thus, it is once again possible to earn more than 5.25% in USD with high quality bonds and low interest rate risk! There is one mistake investors should not make: Panic selling of the portfolio or a complete change of strategy is not recommended. Through constant portfolio analyses, the right adjustments in asset allocation, we successfully steer your assets even through potentially stormy seas.
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Pictures: IStock, Pixabay, Unsplash
Original: Marijke Vosmeer