GRIMALDI & PARTNERS: Stock markets offer investors new opportunities
By Silvano Grimaldi, CEO Grimaldi & Partners
Zurich – The low in October seems to have been the low for the year. Will there be a year-end rally this year? Is the worst over now? Will the positive trend continue in the coming year? Silvano Grimaldi, CEO of the independent asset management company Grimaldi & Partners AG, gives you the answers to these questions.
It's time to invest again instead of relying on cash any longer.
In order to maintain the real value of the invested capital in the long term, investments should currently be made in intrinsic values - and in particular in equities. It is true that not a few bonds from Swiss companies can still achieve respectable real yields to maturity – due to price developments and the comparatively low inflation rates thanks to a strong Swiss franc. However, taking into account the costs of hedging exchange rate risks and the higher inflation rates in the USA and the euro zone, government and corporate bonds from these currency areas will not be particularly attractive for private investors in real terms for the foreseeable future.
The value retention potential of investments in real estate is currently difficult to assess. However, population growth and infrastructure requirements will continue to be decisive factors for all real estate markets in the longer term. Nevertheless, investors should only invest in properties where income can easily be adjusted to cost developments.
Gold does not bring any income and the volatility of the gold market also does not speak for this form of investment. Only with falling interest rates and a depreciating US dollar could a noticeable recovery in the price of gold begin.
Isn't it too early to start investing in stocks again?
Global leading indicators are currently pointing to stagnation or a slight recession in the global economy in the coming months. The heavily export-oriented economies and those economies suffering from the persistently high energy source prices will be particularly affected.
Based on the data available, there is currently no reason to fear a sharp slowdown in the overall economic momentum in the USA. Although the macroeconomic effects of the increases in key interest rates will only be felt with a considerable delay, the current data situation suggests a soft landing in 2023 rather than a recession that is not just technical.
However, corporate earnings expectations paint a very mixed picture and further downward revisions of earnings expectations are likely.
In Europe, the CHF and Euro are on the way to appreciate against the US Dollar and this will ease price pressures in these economies and allow both the SNB and ECB to end interest rate hikes before the Fed.
The stock exchanges in the euro zone and in Switzerland have nevertheless performed better than the US stock markets since the beginning of October, although shares in US-based tech companies in particular have recovered somewhat on the back of the widely expected slowdown in the Fed's interest rate hikes. However, the stock indices in the USA are still lower than at the beginning of the year.
Will the recent rebound in stock prices continue? Or will prices only move sideways? The only thing that is certain is that volatility will remain high for the time being. Price setbacks, especially in the first few months of next year, cannot be completely ruled out. However, there is no reason to fear a sell-off in the USA, Switzerland or the euro zone.
However, risks such as a further weakening of the US dollar and a stronger weakening of the overall economic dynamic due to the only delayed effects of the interest rate increases remain. The stock indices will therefore only be able to recover effectively and sustainably in the course of the first half of 2023 after the central banks in the USA and Europe have ended the cycle of interest rate hikes.
If possible, investments should only be made gradually in shares of companies with a strong market position, high profit margins and attractive and stable dividends, and even if the share prices generally recover when inflation falls and the cycle of interest rate hikes comes to an end.
© 2022, Grimaldi & Partners Ltd.
GRIMALDI & PARTNERS Vermögensverwaltung is a renowned independent Swiss asset manager domiciled in the city of Zurich. The main bearers Silvano Grimaldi, lic.oec. HSG and Dr. iur. Reto A. Lyk are distinguished former bankers with an excellent reputation and more than 25 years of professional experience in asset management in the Zurich financial center. The top-class management team ensures flawless management of the business for the benefit of the customers. Grimaldi & Partners stands for independent, neutral, transparent, cost-conscious, performance-oriented asset management with better asset protection.
GRIMALDI & PARTNERS AG
Phone: 044 520 00 10