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Note: This report was automatically translated from the original german version

Quarterly report Q3/2021 

Review

The summer quarter showed a mixed performance on the global stock markets. While the U.S. stock exchanges were once again able to gain a tick, the Chinese markets in particular had to record losses. In particular, the threat of bankruptcy of the Chinese real estate giant Evergrande sometimes triggered price falls on the Hong Kong stock exchange. The underlying problem results from the high indebtedness of many real estate companies in China on the one hand, and on the other hand from the enormous importance of the industry for the Chinese economy (according to the Financial Times more than 25% of GDP).

Crude oil suffered a severe interim setback, driven, among other things, by newly emerging economic concerns. As recently as the beginning of July, oil, formerly known as “black gold”, was trading at its highest level since October 2018, after which losses of between -15% and -20% were recorded, depending on the type of crude oil. In the meantime, however, prices have risen again significantly.

The inflation rate jumped, especially in Germany, and ultimately reached the highest level since 1993 at over 4%. Energy prices in particular were partly responsible for this increase.

All in all, one can probably speak of a consolidation quarter, which produced winners but also losers. Overall, many investors held back on new commitments and adopted a wait-and-see attitude.

Performance

With our equity fund, we have achieved +4.18% in Swiss francs and 4.30% in euros in the first new months of the year. This compares to the major indices: the DAX +11.79%, the STOXX600 (Europe) +13.44%, the S&P500 (USA) +22.86% and the MSCI World (global) +18.09% (all values in euros).

Our Wydler Global Bond Fund, which was awarded the German Fund Prize 2021, remains a rock. Since the beginning of the year, investors can look forward to a solid gain of meanwhile+5.38% in Swiss Francs and even +5.51% in Euro, whereas the comparable Bloomberg Barclays Global High Yield Total Return Index Value Hedged EUR posted a performance of +2.24%.

Current positioning

In the past quarter, we repositioned ourselves primarily in sectors that had lagged behind the overall market in terms of performance. In particular, the healthcare sector should be mentioned here; we have clearly built up our position in pharmaceuticals. Due to the expectation of rising interest rates, financials appear interesting to us, and the overall weighting was also increased here. The Materials sector has also been given additional weighting; in view of the fundamentally stable and continuing economic growth, the weighting here is also higher than in previous months. On the other hand, we have decided to take some money off the table in oil stocks, partly to realize accumulated gains and partly to avoid being too exposed to the rather strong fluctuations in this segment.

The gold price showed no clear trend in the summer quarter, with a fluctuation range of just under 9%, and our exposure in this area has increased slightly to around 3.5% of the total portfolio. We feel comfortable with this weighting for the time being and are entering the final quarter of this year with it.

Even if our hedges have cost performance in the past quarter, we remain true to our strategy in the current environment, especially since volatility has increased somewhat after the elections. Although we consider the opportunities to be higher than the risks overall, our main focus continues to be on the best possible capital protection of the assets entrusted to us. A portfolio without basic hedging is therefore self-explanatory. We will dynamically adjust hedging to the respective situations in the remainder of the year.

Outlook

Will the last quarter of the year bring the stock market slump predicted by crash prophets? Or will we see a year-end rally that will once again boost the markets and drive them to new highs?

The central banks will take an important position. Initial announcements of a “tapering”, i.e. a controlled scaling back of bond purchases, at least indicate that the easy money policy is coming to an end. However, this is not synonymous with interest rate hikes; both the Fed and the ECB have already made it clear that a fundamental change in monetary policy is not an issue at the moment. Especially since inflation is seen as temporary and not structural.

In the meantime, growth rates in the USA have reached levels that can hardly be exceeded. The first risks of a slowdown for 2022 are emerging, but the Fed would certainly counteract a hard landing.

Europe itself is benefiting right now from an increase in consumption -- following the gradual unwinding of Corona measures. The existing difficulties in the supply chains of numerous products will ensure that catch-up effects will continue well into 2022. The resulting growth may therefore prove to be a fundamentally positive basis for the stock markets. However, after months of generally friendly stock markets, a somewhat more volatile environment should not really come as a surprise.

In addition:

GERMANY HAS ELECTED -- the country will definitely be governed by new heads. Only one thing is clear: Voters have rejected a red-green-red alliance, and the Left Party even fell just short of the 5% mark. That alone was reason enough to trigger a positive reaction (albeit only for one day) on the German stock market.

Whether, at the end of the day, a traffic light coalition (SPD-FDP-Greens) or the Jamaica variant (CDU-Greens-FDP) will win the race is, in our view, of secondary importance for the further development of the markets. The fundamental differences are too small for that and therefore there will be no dramatic changes in direction.

However, as one of the leading countries and economies in Europe, Germany would be well advised to get a government in place as soon as possible. Which then has the great task of steering the country in the right direction by making prudent and sensible decisions and (re)winning the trust of the population. After all, many Germans don’t have a good feeling about the state’s debt and the consequences for the euro.

• How can they, if one keeps in mind that in the euro area the total debt has been more than 100% of the GDP (generated gross domestic product of the European Union) since this year?
• How can it be, when Germany’s public debt as of the end of the first quarter of 2021, at 2.2 trillion euros, marks the highest level ever since the Federal Republic of Germany came into existence?
• How can it be, when entire industries (automotive, coal, steel) are threatening to fall behind and the Asian competition is starting to overtake on the right?

What does this mean for the markets? The election result will be quickly digested. “Political stock markets have short legs,” goes an old stock market adage. In other words, after a fresh look at the situation, appropriate adjustments will be made, only to return to “business as usual” as quickly as possible.

What will remain, however, is negative real interest rates. The combination of negative interest rates and inflation is an unpleasant situation that could well drag on for years to come and tear holes in retirement provisions.

In the week following the election, we’ve been asked a lot of questions: Are stocks safe? What scenarios do I need to factor in for real estate? Is it even possible to make money with fixed-interest securities?

How can I invest my money sensibly, future-proof and crisis-proof in view of the political landscape, inflation and a weakening euro?

We will continue on our current path without any major changes.

• There is no way around equities in the coming years, especially in view of the need to protect against inflation. Investing in substance also makes your portfolio secure and stable.
• Gold is and will continue to be an integral part of our investment strategy as an admixture.
• And last but not least, we have shown with our bond fund that even in times of low and negative interest rates, and even last year through the Corona crisis, it is quite possible to earn money with bonds. Which is why our fund was awarded the German Fund Prize 2021.

With us, you decide whether you want your money managed in Switzerland or Germany. Whether you invest in euros or Swiss francs -- or in a completely different currency. Whichever variant you choose -- we are the right partner when it comes to your assets.

Book an initial consultation directly now

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