Stock market setbacks – our assessment

Over the past few days, international stock markets have declined noticeably. The trigger was U.S. President Donald Trump’s recent announcement of new tariffs. We have carefully analyzed our equity portfolios in light of this to assess the potential impact on our positions.

Complex effects are difficult to gauge

The most affected sectors – such as the automotive or steel industries – are not represented in our portfolios. However, today’s global supply chains are so complex that it’s nearly impossible to quantify the specific impact with any real certainty. Paradoxically, it is often U.S. companies that suffer the most from these measures – for example, apparel manufacturers that produce in Asia and sell in the U.S. We do not hold such companies in our portfolios either.

Uncertainty as the main driver
What’s currently putting the markets under particular pressure is not a specific measure, but general uncertainty:

• What real impact will the political rhetoric have?
• Is globalization being structurally slowed down?
• Will this lead to weaker growth and declining prosperity?

Markets are increasingly pricing in a higher probability of recession. That explains the broad selling pressure – regardless of the quality of individual companies.

The higher they rise, the harder they fall
Segments that have seen particularly strong gains in recent years are now being hit the hardest: technology stocks, growth names, speculative themes. Investors who were overweight in these areas are now seeing disproportionately large losses. In contrast, we have deliberately focused on diversification and a high share of defensive business models – with the goal of providing stability especially during challenging times. These names cannot completely escape the market downturn either, but they are holding up significantly better.

Now is not the time to panic
What to do now? Above all: stay calm. Those who panic and sell in a highly volatile environment risk doing so at the lowest prices – only to be faced with the difficult question: What next? When and how to get back in?
As we emphasized in the last Gutmann Viewpoint: It is nearly impossible to buy back in at a “better” price after having exited. The key question is: How robust are the business models once the selling pressure eases? Our answer: very robust. Weaker players will disappear from the market – our companies, on the other hand, have the opportunity to expand their market share and perform well during a recovery.

Emotional stress – rational preparation
Of course, phases like this are emotionally stressful. Headlines are negative, prices are falling. But these are exactly the situations you’ve prepared for in advance:

• How high should my equity allocation be?
• What kind of setbacks can I tolerate?
• What level of risk suits me?

Now is the time to stick to that plan – not throw it overboard. What’s needed is discipline and composure.

Preparation pays off
We’ve done our homework:

• Back in October, we reduced our equity allocation.
• We increased our weighting of defensive business models.
• And we know that many quality companies can recover quickly once the situation stabilizes.

On the bond side as well, our focus on quality has proven to be the right approach: growing recession fears have led to price gains in high-quality bonds – a stabilizing effect for diversified portfolios.

Our conclusion
The coming weeks will remain challenging – but we are confident in our positioning. We hold no positions with excessive risk, we are not overexposed to individual sectors, and we have prepared for this kind of scenario.
In a phase like this, we do not sell. We stay invested – with a robust portfolio and a clear strategy.
At the same time, we are actively screening our portfolios and keeping a close eye on business models that have long been on our watchlist. In this environment, some of them are suddenly becoming attractive.
Because better is the enemy of good – and we want to actively use this phase to seize opportunities.

If you have any questions or would like a personal assessment, please contact your relationship manager.