Author - Stefan Neubauer
2022 was an "annus horribilis" for investors. 2023 has the potential to be much better, but until then patience is needed and above all the right strategy.2022 was an "annus horribilis" for investors. 2023 has the potential to be much better, but until then patience is needed and above all the right strategy.
This year, investors have been confronted with the rare scenario of both bonds and equities suffering sharp price losses. Since January, most stock markets have been in a bear market. Although individual price rallies, such as the latest one due to slightly lower-than-expected inflation figures in the U.S.A., indicate the upside potential of the markets, a sustainable recovery is (still) lacking. The mixture of high inflation, lower earnings expectations and generally poor sentiment continues to be an unpalatable cocktail for equities.
Resilience in the portfolio
The environment for investors is challenging, but with active asset management, one has the possibility to continuously adapt one's investment strategy to the current circumstances. Kathrein Privatbank has implemented strategies in its portfolios that outperform the market in this environment. In the equity sector, the focus is on defensive stocks and those with pricing power. The fact that this tactic works is underlined, among other things, by two first places at this year's fund of funds awards. In the bond segment, Kathrein invests, for example, in local-currency bonds of emerging markets in order to generate higher returns, but only in issuers with excellent credit ratings, such as development banks. Countries such as Mexico and Brazil have raised interest rates significantly in the past, which means that higher returns can be earned here.
Things are looking up again
Stefan Neubauer, member of the Executive Board of Kathrein Privatbank, believes that the downward pressure on global stock markets will already ease somewhat towards the end of the first quarter of 2023.
Current valuations of global equities are already at a level where historically the bear market is nearing an end. Forecasts for future corporate earnings have already been sharply downgraded during the year, so positive earnings surprises will boost the market.
On the other hand, there is currently no end in sight to the central banks' restrictive interest rate policy in the near future in view of high inflation. "As soon as there are signs of easing on the inflation front, the environment for equity investments will brighten again. Until that happens, the Kathrein Investment Strategy will remain defensive on equities, as it has since the beginning of February 2022, which has clearly paid off for clients of the private bank to date."
This information represents Kathrein's investment strategy and aims to provide a general overview of current market data and does not contain any direct or indirect recommendation for a specific investment strategy in the sense of a financial analysis.