SuisseRock’s June 2021 Market Update
Our portfolio’s have benefited from a strong first half of 2021, following unexpectedly healthy gains in 2020. The disparity between fundamental news flow and market pricing continues to persist in our opinion, whereby current valuations look heady, and largely in the hands of future central bank action.
That is not a call for a wholesale move to cash. More a warning shot for realisation of a proportion of gains made and utilising increased protection against potential future sell off’s.
There are many reasons to be more optimistic with vaccination programmes being swiftly stepped up globally and early signs of much improved economic activity. We believe, however, a great deal of these positive signs are already priced in, and that inflationary risks, albeit historically at a low ebb, risk a change in stance from the loose monetary policy we are seeing across the planet. We believe that even a relatively small change in rhetoric towards tightening these controls, could result in a significant sell off in underlying markets.
So where does that leave our clients portfolio’s for the remainder of 2021?
A gradual realisation of profits, combined with increased cash exposure and protected investments, we believe we can ensure we capitalise on an excellent 2 year return, whilst making ready for a potentially more volatile and perhaps less fruitful second half of 2021.
In those areas where we see value ( albeit cautiously ) we are assessing the risk of direct equity ownership, over the capped returns we can achieve through Structured investments offering typically 50% protection to capital invested. Aviation, Travel, Clean Energy and Mining are among sectors we believe could see short to medium term opportunity. These sectors have seen tremendous gains over a 12 month period, but, when carefully analysed for further rebound, we can see reasons to be bullish here.
Overall, we are, perhaps unexpectedly after such a disrupted year for global economic activity, in the enviable position of concentrating more on protecting past outperformance, than striving to squeeze out what we see as diminishing returns coupled with increased downside risk. Balancing portfolio’s to maximise opportunity with plenty of protection will be our challenge for the remainder of 2021. We have the tools to achieve continued returns, regardless of market volatility, and achieving the right balance of asset allocation between risk and protected risk will define our clients total 2021 returns.