GENEVA - Tuesday, November 27th 2012 [ME NewsWire]
NewsWire)-- Faced with a sluggish and stimulus-dependent world economy, central
banks have reasserted their will to do all in their power to restore growth and
confidence in the markets.
In the eurozone, the central bank’s
credit stimulus has yet to feed through into the real economy, which does not
bode well for consumer spending or investments, the only two factors that can
set the economy on a self-sustaining growth path. And whilst the effects of the
Fed’s measures have recently started to be felt in the US, thereby boosting its
real estate sector, the world’s leading economy is still on the edge of its
so-called fiscal cliff – the combination of drastic spending reductions to
alleviate public debt and the expiry of Bush-era tax cuts could cost the US
economy up to 5% of its GDP.
According to Alan Mudie, Union
Bancaire Privée’s Chief Investment Officer, "central banks have understood that
they must ‘keep on pushing’ to fend off the risk of deflation and put the
economy back on track”. In short, the challenge in 2013 will be to sustain the
current reflation policies while keeping inflation at bay.
UBP’s convictions for 2013
- Equities should continue to be favoured, whilst
maintaining the Bank’s all-important focus on high-quality stocks, i.e.
those of large firms with an international reach, high entry barriers and
regular cash flows allowing high and rising dividend payments.
- Another focus is real assets, which are more resilient
to – and provide more protection from – inflation. More specifically,
plays like mining companies and large energy producers are the most likely
to benefit from the current monetary policies. The US real estate sector
is also well-positioned to take advantage of the current situation and
participate in the economic recovery.
- Eventually, the creeping monetisation of public debt
and central bank intervention are by their very nature likely to erode the
value of the currency in countries that make the most assiduous use of the
printing press; gold is undeniably set to gain from this trend and its
price will rise with monetary expansion.
- One should also steer clear of government bonds and
within credit convertible bonds are a good choice: through their convexity
they allow the investor to capture equity rises while limiting downside
risk, with lower volatility than in pure equities.
- Emerging countries still offer stronger fundamentals
and their external debt remains attractive for investors.
- Lastly, flexible alternative strategies, which are able
to benefit from the reflation-driven equity surge and also to shelter from
passing corrections, should be targeted. The environment is also
propitious for strategies that focus on distressed debt and on
opportunities generated by financial institutions’ deleveraging.
Note to editors
UBP is a leading private bank in
Switzerland and is one of the country’s best-capitalised banks, with a Tier 1
ratio of 23.5%. The Bank specialises in wealth management for both private and
institutional clients. It is based in Geneva and employs around 1,400 staff in
some twenty locations worldwide. The Bank had CHF 76 billion (USD 80 billion)
in assets under management as at 30 June 2012.
Union Bancaire Privée
Jérôme Koechlin, +41 58 819 26 40
Head of Corporate Communications