A sweet & sour cocktail full of potential surprises
Markets look already into 2021/2022, but remain exposed to short term volatility
- The sharpest decline in history was followed by the steepest recovery in history.
- In April Global Developed Markets were up 10.9%, Global Small Caps gained 12.5% and Emerging Markets were up 9.2%.
- Markets are exposed to big short term uncertainties, but have shifted focus into 2021/2022, explaining the current disconnect between recovering equity markets and deteriorating economic news
- After Corona, markets will have to deal with unprecedented fiscal deficits and inflated central bank balance sheets. Could be a further step towards a currency reform.
- „Asset Price Inflation, Part 2“ is likely to play in the years to come. Logic investment focus should therefore be on real assets which is favorable to equities.
- Expect large swings in the short term
- The potential sour ingredients are many: Worse than expected recession, serious EURO-zone instability, rising tensions between US and China and a worsening of the global pandemic (second waves, global surge of new hotspots)
- The possible sweeteners are faster than expected progress on the medical cure and vaccine front, a faster return to normality and the economic benefits from unprecedented monetary and fiscal stimulus
- It is more than ever a good strategy to stay invested in fundamentally good companies
- The companies we invest in have a unique combination of characteristics which cannot be found elsewhere: high growth rates, a superior profitability, a higher ESG quality score, a very low carbon footprint and a big valuation discount at the same time.