An economy
on standby, and this for weeks or months, is likely to leave a significant dent
in the global growth path. It is not without reason that governments are now
putting together economic stimulus packages and further monetary policy measures.
The
situation on the financial markets has hardly changed compared to the previous
week. Price fluctuations have reached a level last seen in the financial crisis
of 2008. The very optimistic valuations of 4 weeks ago have now turned into
pessimistic prospects for most companies. The sharp drop in share prices even
implies valuations that assume that companies will not be able to pay dividends
in the next 5-7 years. Above all, cyclical sectors such as industry and finance
are losing ground, while defensive sectors have also suffered losses, but have
held up comparatively well.
In this
market environment, OLZ equity strategies were able to systematically
outperform. The optimized stock selection and the more defensive sector
allocation led to a cushioning of the losses.
The flight
to the "safe haven" has also continued in the last few days. The
addition of top-quality bonds paid off in this large and rapid correction.
Bonds rose or at least remained stable, acting as an airbag for the entire
portfolio.
In recent
weeks, it has once again become clear how important effective diversification
and strict risk management are. The OLZ stock and bond modules were able to
meet the expectations placed on them and thus contribute to some stability in
the portfolio. Compared to the market average, our risk-based approach helped
limit losses.
If stock markets lose more than 30%, individual
investors may also consider adjusting their investment strategy. As a
specialist for risk-conscious investment solutions, we at OLZ have already
experienced similar crisis situations in our almost 20-year history. This
experience taught us that key aspects must be evaluated in a structured and
objective framework when determining the investment strategy. The following
questions can serve as a guideline:
- Has my risk capacity changed? The
risk capacity depends on whether the personal financial situation has changed.
Important: The risk capacity does not depend on the direction in which the
stock markets are currently moving.
- Has my investment horizon in
particular changed recently? Anyone who holds part of their assets in equities
must keep a long-term perspective in mind. Within this perspective, there will
always be smaller and larger fluctuations in portfolio value.
- Has my willingness to take risks
changed? When markets fluctuate strongly, investors' risk aversion increases
and their behaviour becomes increasingly pro-cyclical. This is definitely not a
good guide for ad hoc adjustments to the investment strategy.
If you have answered all questions with "No",
we recommend that you remain calm and consistently pursue your investment
strategy. Within the framework of the OLZ mandate we guarantee disciplined
implementation. Otherwise, we will be happy to be at your disposal (by phone)
to evaluate any questions and key points of your strategy.
We wish you and your environment all the best and stay healthy!
