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At some stage, the Nasdaq index was down double digits, and so were oil & gas stocks. The VIX (volatility) index (the fever curve of stock markets) revisited the mid-30s, and UK real estate and global commodities were down high single digits. The safest assets were Swiss stocks and government bonds. While the US elections are still five weeks away and the pandemic is still dominating the head-lines, some of the market turbulence seems to be exhausted in the short run.

This may not mean that established trends are reversing for good. Yet the herd of investors may want to halt and regroup – something they particularly like to do at the end of a quarter. With this in mind, we think that short-term traders can enter some positions, with the usual stop-loss discipline. Investors can write some insurance instead, since insuring the downside in stock markets is still invitingly priced by options markets. As for some of the trends that have been established in 2020, such as an improving economy and a weakening of the US dollar, these are not likely to be reversed beyond the shorter term. Hence, we stick to our preference for gold stocks over gold and reiterate our most controversial sector call – sticking to financials overall.

While our preference for information technology, cyclicals overall and healthcare stocks went largely undisputed, the one for financials has been under fire for quite some time – both verbally and performance-wise (these usually go hand in hand). To blame everything on bond yields may be delegating the issue. However, overall we still believe bond yields do not properly reflect economic prospects into 2021 and will normalise eventually – even in a yield-curve-control regime. The same goes for default risks, which are holding back financial stocks. This should give financials a longed-for lift.