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Ahead of the curve: Top 10 Convictions for investments

July 3, 2020

A commentary by Jürgen Lukasser, Chief Investment Officer of LGT Bank Österreich, on LGT´s Top 10 Convictions for investments during the second half of the year.

Ahead of the curve: Top 10 Convictions for investments
  1. Social distancing
  • Business models in which distance rules are easy to implement could have an advantage
  • The industry should be able to recover faster than broad private consumption
  • We recommend companies profiting from social distancing and having well-filled order books
  1. Scarcity of earnings growth
  • Central banks and governments are reacting to the slump with a massive flood of money
  • Fundamentally sound corporate profits cannot be “printed”
  • We favor companies with structural growth drivers and defensive qualities of their business model
  1. Fallen champions
  • Cyclical sectors, hit hard by the corona measures, suffered above-average price losses
  • For these sold-out sectors there is a lot of fundamental improvement potential starting from low levels
  • We like cyclical companies with leading positions and longer-term upside potential
  1. Safe dividends in unsafe times
  • Quality equities with high and stable dividends are particularly attractive in the current uncertain times
  • Their relative attractiveness compared to corporate bond yields is historically high
  • Dividends have a signal effect that reflects management's confidence in future business development
  1. A watershed moment for sustainable investing
  • During the recent turmoil, sustainable companies have generally outperformed the broader market
  • They benefitted from the long bull market, but also came through the crash in good shape
  • We expect diversified sustainable investing portfolios to offer more defensive characteristics
  1. Covid-19 is a call for digital transformation
  • The corona pandemic gives additional boost to digitization in many areas
  • We believe that the current crisis will bring about a lasting change in behavior
  • This opens opportunities in segments such as Fintech, Digital Health or Education Technology
  1. Attractive investment grade corporate bonds
  • Further rating downgrades are expected
  • Investors should build positions in US dollar and euro corporate bonds
  • Taking advantage of selective opportunities while remaining focused on quality
  1. Corporate hybrids benefit from monetary policy
  • As public stimulus is very credit-positive for large companies, corporate hybrids gained in attractivity
  • Yield curves will remain contained on low levels which will trigger a renewed hunt for yield
  • Return expectations are between 4-5% for this year, providing a decent risk/return profile
  1. Gold is shining for many good reasons
  • Gold enjoys structural tailwinds from risk, yield and monetary drivers
  • Both fundamental and technical factors suggest that the rally is well founded
  • Price upside remains intact and gold is a clear “buy-the-dip” asset
  1. Long-dated US Treasury bonds, the good hedge
  • Yields on long-term government bonds are currently rising faster than yields on short-term bonds
  • Current levels of long-dated US Treasury yields appear fair
  • Long-dated US Treasuries offer insurance against adverse market events and help to stabilize portfolios