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Testing new waters

The common denominator between January and February is financial reporting triggering unpredictable price action. We invite you to take a few positions in some of the long-term laggards to get some exposure to the most-battered areas in 2020. For longer-term investors, we see Indian stocks as a prime diversifier.

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Key takeaways:

  • End-of-month trading sessions turned jittery as fund managers rebalanced. We suggest shrugging off the hiccups and adding to assets driven by a better macro picture.

  • We upgrade Indian stocks on their long-term appeal. Time to get more picky in the clean-energy space.

Investors need to buckle up every end of the month, it seems. In January, it was retail investors challenging the shortsellers. Last week, it was inflation fears and the central banks’ response haunting the markets. Yet as different as these narratives might be, the common denominator between January and February is financial reporting triggering unpredictable price action. You may argue that this does not bode well for markets that should be liquid enough to withstand any flows. We would rather read it as a sign of excessive positioning in the short term. If everybody runs for the exit at the same time, major price swings occur. This is perhaps particularly hard for investors without exposure to US stocks and the innovation space, as these investors have not been blessed with long-standing bulls, where setbacks are to be bought relentlessly. Instead, they know non-trending markets, where one buys when sentiment is in distress and sells whenever there is euphoria. 

How to react to recent market signals?
All the more so, we have been advocating for those investors to shrug off the noise and stay the course, as this bull market is broadening beyond the market leaders of the past decade. We have highlighted structural breakouts in many new places, including Japanese, South Korean, and German stocks, as well as Swiss mid-caps. The name of the game in this bull market is to go from US-centric to global, and from innovation-driven to the broader economy. It may take quite some time to adapt the mindset to this new regime. To make the change easier, you may want to proceed gradually. We invite you to take a few positions in some of the long-term laggards to get some exposure to the most-battered areas in 2020. For longer-term investors, we see Indian stocks as a prime diversifier. The demographic strength is unbroken (see our number of the week). As for stock performance, the market there recently broke out of a 15-year range in US dollar terms.

How should you position your portfolio in the view of Julius Baer's experts?

> Contact us to find out

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