Our positioning: US equities well positioned for recovery

The financial markets are still focusing on the end of the pandemic – which will hopefully come soon. Equity prices continue to hit new record highs worldwide. The prices of many commodities, which fell sharply during the coronavirus recession, are making a strong recovery. The oil price has reached a level last seen in summer 2019.

Second wave has less impact

Despite ongoing lockdowns, short-time working and unemployment, investor optimism does not seem to be waning. Economic statistics actually indicate that people are coming to terms with coronavirus, or at least adapting to it.

During the first wave of coronavirus in the second quarter of 2020, economic output shrank in industrial countries by between 5 and 15 percent year-on-year. During the fourth quarter of 2020, when many countries were hit by a second wave and had to impose new lockdowns, very few countries and regions recorded negative growth. These included many European countries. The surveys conducted monthly also suggest that European consumers and companies are more restrained overall than their counterparts in Asia and the US.

The US government is providing huge stimulus packages to ward off another recession. Consumption remains strong despite high unemployment. Companies are extremely optimistic, and further fiscal packages are expected. The USA’s flexible economy also means it is well positioned for recovery. The US economy seems better placed than Europe’s in the short and medium term. As a result, we are positioning our portfolios with greater emphasis on US equity investments, at the expense of European ones.

Extreme market fluctuations for large caps have not become much more frequent.

Speculation mainly on small caps

We are monitoring speculative excesses, as observed with equities from US small caps in recent weeks. Price rises of over 100 percent within a few days, followed by equally dramatic losses, remain the exception, however. Even though much more trading is currently taking place on equity markets than during normal times, we have not observed significantly more frequent extreme market fluctuations for the equities from large caps that we hold. We are also minimizing risk through the large number of equities that we hold in the portfolios – there are currently around 600 in the USA.

Reducing bond allocations

Economic optimism has in turn resulted in rising interest rates. The price of many bonds has fallen as a consequence. Some inflation-protected, high-quality bonds escaped the decline in prices. Higher inflation forecasts in particular contributed to the rise in interest. By purchasing inflation-protected bonds in April 2020, we positioned our portfolios perfectly for this scenario. We are now closing this position and reducing the allocation of bonds in the portfolios. With gaining economic momentum, it is anticipated that the central banks will provide less support in future, which could put bonds under pressure.

Performance of asset classes

Currencies1 month in CHFYTD in CHF1 month in LCYTD in LC
Currencies
EUR
1 month in CHF
–0.2%
YTD Year-to-date: since the start of the year in CHF

–0.1%

1 month in LC Local currency
–0.2%
YTD Year-to-date: since the start of the year in LC Local currency
–0.1%
Currencies
USD
1 month in CHF
0.0%
YTD Year-to-date: since the start of the year in CHF
0.6%
1 month in LC Local currency
0.0%
YTD Year-to-date: since the start of the year in LC Local currency
0.6%
Currencies
JPY
1 month in CHF
–0.5%
YTD Year-to-date: since the start of the year in CHF
–0.8%
1 month in LC Local currency
–0.5%
YTD Year-to-date: since the start of the year in LC Local currency
–0.8%

Equities1 month in CHFYTD in CHF
1 month in LCYTD in LC
Equities
Switzerland
1 month in CHF
0.5%
YTD Year-to-date: since the start of the year in CHF
1.6%
1 month in LC Local currency

0.5%

YTD Year-to-date: since the start of the year in LC Local currency
1.6%
Equities
World
1 month in CHF
3.0%
YTD Year-to-date: since the start of the year in CHF
5.2%
1 month in LC Local currency
3.0%
YTD Year-to-date: since the start of the year in LC Local currency
4.6%
Equities
USA
1 month in CHF
3.5%
YTD Year-to-date: since the start of the year in CHF
5.4%
1 month in LC Local currency
3.5%
YTD Year-to-date: since the start of the year in LC Local currency
4.8%
Equities
Eurozone
1 month in CHF
1.2%
YTD Year-to-date: since the start of the year in CHF
3.4%
1 month in LC Local currency
1.4%
YTD Year-to-date: since the start of the year in LC Local currency
3.5%
Equities
United Kingdom
1 month in CHF
–2.0%
YTD Year-to-date: since the start of the year in CHF
2.6%
1 month in LC Local currency
–4.1%
YTD Year-to-date: since the start of the year in LC Local currency
1.0%
Equities
Japan
1 month in CHF
3.7%
YTD Year-to-date: since the start of the year in CHF
6.3%
1 month in LC Local currency
4.2%
YTD Year-to-date: since the start of the year in LC Local currency
7.2%
Equities
Emerging markets
1 month in CHF
5.9%
YTD Year-to-date: since the start of the year in CHF
11.3%
1 month in LC Local currency
5.9%
YTD Year-to-date: since the start of the year in LC Local currency
10.7%

Fixed income1 month in CHFYTD in CHF
1 month in LCYTD in LC
Fixed income
Switzerland
1 month in CHF
–0.7%
YTD Year-to-date: since the start of the year in CHF
–0.8%
1 month in LC Local currency

–0.7%

YTD Year-to-date: since the start of the year in LC Local currency
–0.8%
Fixed income
World
1 month in CHF
–0.1%
YTD Year-to-date: since the start of the year in CHF
–0.5%
1 month in LC Local currency
–0.1%
YTD Year-to-date: since the start of the year in LC Local currency
–1.1%
Fixed income
Emerging markets
1 month in CHF
0.4%
YTD Year-to-date: since the start of the year in CHF
–0.4%
1 month in LC Local currency
0.4%
YTD Year-to-date: since the start of the year in LC Local currency
–0.9%

Alternative investments1 month in CHFYTD in CHF
1 month in LCYTD in LC
Alternative investments
Swiss real estate
1 month in CHF
–0.3%
YTD Year-to-date: since the start of the year in CHF
–0.9%
1 month in LC Local currency

–0.3%

YTD Year-to-date: since the start of the year in LC Local currency
–0.9%
Alternative investments
Gold
1 month in CHF
–0.4%
YTD Year-to-date: since the start of the year in CHF
–2.0%
1 month in LC Local currency
–0.4%
YTD Year-to-date: since the start of the year in LC Local currency
–2.5%

Our positioning – Swiss focus

LiquidityTAA oldTAA new
Liquidity
CHF
TAA old Tactical asset allocation: short- to medium-term positioning
4.0%
TAA new Tactical asset allocation: short- to medium-term positioning
6.0%
Liquidity
JPY
TAA old Tactical asset allocation: short- to medium-term positioning
1.0%
TAA new Tactical asset allocation: short- to medium-term positioning
1.0%
Liquidity
Total
TAA old Tactical asset allocation: short- to medium-term positioning
5.0%
TAA new Tactical asset allocation: short- to medium-term positioning
7.0%

Equities
TAA oldTAA new
Equities
Switzerland
TAA old Tactical asset allocation: short- to medium-term positioning
26.0%
TAA new Tactical asset allocation: short- to medium-term positioning
26.0%
Equities
USA
TAA old Tactical asset allocation: short- to medium-term positioning
8.0%
TAA new Tactical asset allocation: short- to medium-term positioning
10.0%
Equities
Eurozone
TAA old Tactical asset allocation: short- to medium-term positioning
5.0%
TAA new Tactical asset allocation: short- to medium-term positioning
3.0%
Equities
United Kingdom
TAA old Tactical asset allocation: short- to medium-term positioning
2.0%
TAA new Tactical asset allocation: short- to medium-term positioning
2.0%
Equities
Japan
TAA old Tactical asset allocation: short- to medium-term positioning
2.0%
TAA new Tactical asset allocation: short- to medium-term positioning
2.0%
Equities
Emerging markets
TAA old Tactical asset allocation: short- to medium-term positioning
5.0%
TAA new Tactical asset allocation: short- to medium-term positioning
5.0%
Equities
China
TAA old Tactical asset allocation: short- to medium-term positioning
0.0%
TAA new Tactical asset allocation: short- to medium-term positioning
0.0%
Equities
Total
TAA old Tactical asset allocation: short- to medium-term positioning
48.0%
TAA new Tactical asset allocation: short- to medium-term positioning
48.0%

Fixed incomeTAA oldTAA new
Fixed income
Switzerland
TAA old Tactical asset allocation: short- to medium-term positioning
19.0%
TAA new Tactical asset allocation: short- to medium-term positioning
19.0%
Fixed income
World
TAA old Tactical asset allocation: short- to medium-term positioning
10.0%
TAA new Tactical asset allocation: short- to medium-term positioning
10.0%
Fixed income
Emerging markets
TAA old Tactical asset allocation: short- to medium-term positioning
6.0%
TAA new Tactical asset allocation: short- to medium-term positioning
6.0%
Fixed income
Inflation-protected bonds
TAA old Tactical asset allocation: short- to medium-term positioning
2.0%
TAA new Tactical asset allocation: short- to medium-term positioning
0.0%
Fixed income
Total
TAA old Tactical asset allocation: short- to medium-term positioning
37.0%
TAA new Tactical asset allocation: short- to medium-term positioning
35.0%

Alternative investmentsTAA oldTAA new
Alternative investments
Swiss real estate
TAA old Tactical asset allocation: short- to medium-term positioning
5.0%
TAA new Tactical asset allocation: short- to medium-term positioning
5.0%
Alternative investments
Gold
TAA old Tactical asset allocation: short- to medium-term positioning
5.0%
TAA new Tactical asset allocation: short- to medium-term positioning
5.0%
Alternative investments
Total
TAA old Tactical asset allocation: short- to medium-term positioning
10.0%
TAA new Tactical asset allocation: short- to medium-term positioning
10.0%
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