One reason this year has been particularly difficult for investors is that there is no refuge. Stocks and bonds have fallen together. During one act, Andres Allende, manager of A&G’s DIP Value Catalyst Fund, explained, “Twice as much money has been lost than Lehmann.” This has created a negative sentiment in the market. “And this is at the point of the worst stock market sentiment when there is usually a good start to the next years, and returns of 15% and 20% are very frequent”, he said.
Allende, who is from Cobas AM, remembers that the stock market always rises after a recession. “If you wait a year, it usually goes up 15% on average and 50% over three years,” he explained.
Diego Fernández-Elyces, the investment director of this private banking entity, assures that “it is still too early to take whatever risk we can, but it is certainly too late to mitigate”. The key factor remains inflation, and in A&G’s opinion there are signs that the peak is approaching. And when that happens, central banks can start a new cycle of lowering interest rates.
Fernandez-Ellis described, “The stock market investor has already experienced this. What is unprecedented has happened in fixed income. It has never fallen so much since the world wars.” Regarding whether we’re already close to a surrender, he explains that a 60/40 portfolio shrinking 20% ”seems like a pretty advanced surrender to me.”
All this gives rise to an investment climate in which today they can find investment options they had not had for years. “We have a higher risk market than in recent years because we are in a transition that may last for a long time, but it is a remunerative risk”, he indicated.
In fixed income, bonds pay off again, and equities trade at a fair valuation. “We still don’t like governments, but bonding with a few people as a miscellaneous element is no longer an aberration,” he said. In investment grade loans they are more comfortable and explain that it is already possible to build a portfolio with returns of 3%.