ECONOMIC TREND / INFLATION
The global economic chill persisted throughout the third quarter. The leading indicators suggest that the economic trend will remain sluggish until well in the coming year. Conversely, inflation pressure is likely to ease, and no further interest-rate hikes are in sight in Europe.
The American economic engine is still stalling. As long as the value of real estate keeps eroding, property prices will continue to have a negative impact on the balance sheets of banks and on consumer spending. While the adjustment process in home prices is already far advanced, the demise is not yet over – even though the curve seems to be close to bottoming out. The economic slump is washing over from the USA to Europe, and to a slightly lesser degree to Asia as well. In the second quarter, growth in the Eurozone dropped into negative territory. Several large nations, among them Germany, Great Britain, and Spain, are limping. The emerging markets had no way to opt out of the global trend, either. Although most of them still have robust domestic economies, they can feel the slowdown in export demand. While it was a much touted possibility, the emerging markets were not able to uncouple from the rest of the world. Even if the financial system crisis is not yet over, several indicators suggest that the U.S. economy is beginning to stabilize. A certain return to normalcy in key commodity prices (oil, food) is a contributing factor. Given its legendary self-healing powers, the U.S. economy will once again work its way out of the maelstrom ahead of Europe and the rest of the world.
INVESTMENT STRATEGY
Due to positive interest and inflation outlooks, the recommended quota for bonds has been increased, also with a view to leveraging spreads. Buys can be financed from the liquidity cushion. Exposure in equities will be neither increased nor reduce as long as economic uncertainties persist. U.S. stocks could become attractive again if the American economy succeeds in rebounding before Europe and Asia do. This could also support the U.S. dollar. Exposure in foreign currencies is being reduced for USD-referenced investors, but for European investors, the U.S. dollar quota could be marginally increased. The price decline in commodities prompted a reduced weighting of this instrument category in the managed portfolios. Existing positions should be held but not yet rebuilt to the former level. The quota has thus been slightly reduced.
This material is get from “Dear Investor,” a quarterly publication, outlines the investment strategy pursued by Solidinvest. About the publisher:
Since 1985, Solidinvest has been managing substantial assets on behalf of an international private clientele. The funds are held in client accounts administrated by large Swiss banks with whom Solidinvest is connected online.
Solidinvest is operated under the supervision of a board of directors with in-depth experience in all private banking issues. The investment strategy is developed by a team with the assistance of respected experts and constantly adjusted to changing market conditions.
The primary objective at Solidinvest is to provide clients with the highest attainable degree of security in conjunction with the management of their assets. The name Solidinvest suggests the company’s philosophy.