Market Outlook 2019: What matters to your portfolio

In 2019, financial markets will remain highly volatile. In such a context, investors should focus on quality. Yves Bonzon, Chief Investment Officer, and Christian Gattiker, Head of Research & Investment Solutions, lead the way.

1. High-quality growth stocks

Yves Bonzon: “2018 was a year of transition – transition to a new interest rate regime: monetary policy is becoming normalised, interest rates are rising and accordingly, asset classes are looking for a new equilibrium. That process is by definition extremely volatile. In such a context, an investment portfolio’s backbone should be high quality equities, preferably with a growth bias because growing annuities offer better protection against a world of higher cost of capital.”

2. Digital disruption

Christian Gattiker: “Digital disruption goes mainstream. Especially in 2019, we think there will be a big push outside the classic technology sector, with healthcare as the main target. There are plenty of opportunities in the healthcare sector – be it in genomics, big data or insurance-related areas. So instead of simply focusing on artificial intelligence, cybersecurity and the like, digital health  is one of the main themes that all investors should have in their portfolios.”

3. Store of value

Christian Gattiker: “Investors are in search of a store of value, of safe havens, such as gold or government bonds. Unfortunately, most of these are very crowded or under scrutiny. But there is an alternative that may sound counterintuitive at first glance: Swiss stocks, in particular those of family-owned businesses. Equities of such companies prove to be a store of value in the long-term, as they are very capital-disciplined and exhibit investor-friendly behaviour. Therefore we think that in every global portfolio there should be at least a few percentage points of Swiss family-owned businesses within the equity allocation.”

4. Navigating financial markets

Yves Bonzon: “In a world of shrinking liquidity we expect volatility to remain a feature throughout 2019. Nonetheless, the strategic asset allocation should always be the starting point of any portfolio, simply because harvesting risk premia is and always will be the major source of returns for most investors. Yet above and beyond strategic allocation, a little bit of tactical trading might actually enhance returns in 2019. In a world dominated by algorithmic and machine trading at the short-term end of time horizons, we think a slightly contrarian bias towards tactical trading should be favoured.”   

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