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Remember to come back in September

“But remember to come back in September” is the less famous sequel to the “sell in May” rule. Those investors who earmarked Labour Day 2020 (7 September) as a potential re-entry back in mid-May may be rubbing their eyes.

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Stocks worldwide are trading 20% higher than they did then. Furthermore, the ever-winning new economy stocks got a first bump on the nose last week. So the primary question is how to deal with the fact that financial markets do not stick to the seasonal protocol – yet again – and the technology bully seems quite well acknowledged.

The pandemic, trade tensions, US elections, Brexit – there is more than enough for investors to worry about.

Christian Gattiker, Head of Research

Reduced risk appetite
We suggest staying the course and then using this sobering of sentiment on the new economy to buy some of the less glamourous names. Also, watch out for thematic investments. The main reason we suggest staying the course overall is the fact that the general risk appetite remains quite subdued. When looking at investor surveys, fund flows and positioning, we have a hard time calling for a general top in risk assets. To the contrary, all those readings point to quite a subdued sentiment and a continuation of the ‘wall of worry’ trajectory. The pandemic, trade tensions, US elections, Brexit – there is more than enough for investors to worry about.

For single stocks, this opens up some opportunities in names that may not be as glamorous as the tech divas. Then there are thematic opportunities too. We have quite some client interest around hydrogen-power-related companies. Some of those stocks saw a price increase by a factor of five or more (see our number of the week). While we are not in the business of chasing ambulances, we think it is a good time to re-visit the green utilities story in Europe. For those suppliers, the hydrogen story is icing on the cake of a sustainable overall growth path.