FLASH – Evergrande
Xavier Hannaerts, Head of Investments & Conducting Officer et Aykut Efe Economist & Strategist chez Spuerkeess Asset Management exposent le contexte...
Since February, as COVID-19 has rippled across the globe, there has been a widespread sell-off in the financial markets, combined with a literal explosion of volatility. The equity markets thus fell sharply between 1 January and 31 March. For example, the US S&P 500 index was down 20%, while its European counterpart, the Stoxx Europe 600, tumbled 23% over the same period.
Contrary to popular belief, this widespread sell-off did not benefit assets generally considered defensive.
The dollar has depreciated by nearly 2% against the euro since 20 February.
On the bond market, sovereign rates also soared, and private debt risk premiums followed in their wake. Only US Treasuries actually managed to limit the damage during the first quarter.
In this increasingly complex environment, the digital automated investment product Speedinvest has proven to be the ideal investment. Investors just have to answer a few targeted questions to then take advantage of an affordably priced portfolio that perfectly matches their risk profile.
By making small and steady contributions, investors can also smooth the performance of their portfolio while benefiting from particularly attractive entry points. Lastly, portfolios are managed professionally with a view to diversified investments in equities and bonds.
Let’s take the example of an investor with a profile that the Speedinvest robot calls "balanced". That portfolio is invested 50% in equities and 50% in bonds. In early April, it had lost 10,77%. In this particular case, the portfolio's ability to withstand the recent bout of volatility on the financial markets can be attributed to active management based on a fundamental economic approach. This methodology can be used to structure portfolios based on the expected developments in economic conditions.
Our cautious view of the global economic outlook and the high valuations in a number of sectors at the beginning of the year led us to maintain a conservative stance on equities. We were also underexposed to the European market with a preference for the US market, where growth was more robust.
However, the spread of the virus in the US led us to reconsider our geographic positioning and to make an adjustment at the end of the quarter. We have therefore reduced our exposure to the US market. In terms of sector allocation, we prefer securities from less cyclical sectors such as Communication Services, Real Estate and Healthcare.
The combination of the global economy and very low risk premiums led us to maintain a neutral stance on public and private debt in Europe throughout the quarter. In the US, we continue to prefer corporate bonds and short-term sovereign bonds. This geographic divergence is justified by the weaker economic growth in Europe compared with the US.