9/15/22 3:45 PM - Lesezeit

An Optimistic Purchase

Robert Karas

Chief Investment Officer, Partner

Electricity prices soar to unprecedented heights. Central banks strangle the economy with relentless interest rate hikes. The European winter brings back the warming rooms of the postwar era. The conclusion and response? We increase our equity exposure.

If you leave these statements as they are, you - like the majority of our customers and readers - will certainly feel provoked. But what do you think of the following premise?

Electricity prices and European energy supply concerns are no longer a surprise for market participants. The decisive approach of the European and U.S. central banks briefly unsettled the stock market, but the latest interest rate move by the European Central Bank ECB was received positively by the stock markets. After all, the stock market often runs a bit ahead of economic developments. We are therefore increasing our equity ratio in the expectation that the hovering dark clouds will become fewer. Only those who remain optimistic will recognize opportunities and will want to seize them.

Probability and recurring patterns

Canadian field hockey legend Wayne Gretzky once said, "I skate to where the puck is going to be, not where it has been."

Where has the stock market been in recent months? Since the beginning of the year, it has moved down in waves. The low in March did not hold and in mid-June, we saw even lower prices. A countermovement followed over the summer, formulating one question with increasingly importance: Is this just a bear market rally or a longer-term upswing?

We analyze and track various indicators that measure the sentiment of market participants and assess the quality of the upswing. While the tentative rise in share prices after the March low was on shaky ground and did not encourage us to buy, the ascent of prices in the summer was much broader in scope whether you analyze the number of stocks, the different sectors or countries. Even the last quick downturn after the central bankers' meeting in Jackson Hole in the U.S. had more of a bottoming quality for us.

Add to that the shadow of the U.S. presidential cycle. Politicians want to be (re)elected. Therefore, they set fiscal and monetary measures that affect the stock markets. These recurring patterns increase the probability of a year-end rally and a good coming 12 months on the stock markets.

Difficult moments are good times to buy

Of course, the decision to actively deviate up or down from the strategic equity weighting is never clear and unambiguous. Rather, it is a few data points that tip the scales. What is true in any case is that we find excellent quality companies at attractive prices. This gives us the conviction to stick to them even in stormy times.

2022 has so far been an "annus horribilis" for mixed portfolios, with both equities and bonds coming under heavy pressure. However, there is no reason why this setback cannot be recovered. History shows that phases like the one we are currently experiencing offer excellent buying points. We will never catch it exactly, but the probability is on our side.

We would be happy to share our optimism with you in a personal conversation. Please contact your relationship manager. We are always at your side, even in challenging times.

Disclaimer: This is a marketing communication. Investments in financial instruments are exposed to market risks. Past performance or forecasts are not reliable indicators of future results. Tax treatment depends on each client's personal circumstances and may change in the future. Bank Gutmann AG hereby explicitly points out that this document is intended solely for personal use and for information only. Publishing, copying or transfer shall not be permitted without the consent of Bank Gutmann AG. The contents of this document have not been designed to meet the specific requirements of individual investors (desired return, tax situation, risk tolerance, etc.) but are of a general nature and reflect the current knowledge of the persons responsible for compiling the materials at the copy deadline. This document does not constitute an offer to buy or sell or a solicitation of an offer to buy or sell securities. The required data for disclosure in accordance with Section 25 Media Act is available on the following website: https://www.gutmann.at/en/imprint

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