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LGT Asset Allocation – December 2019

November 27, 2019

We have decided to pursue a dual strategy: On the one hand, the build-up of the European equity quota corresponds to the global economic growth of still more than 3%. On the other hand, the further expansion of gold will provide a hedge against uncertainty and volatility in a balanced portfolio.

Asset Allocation LGT Private Banking Europe

Dual strategy: building up equities and gold at the expense of cash

Macroeconomic indicators are beginning to stabilize further. Market participants expect further relaxation on the geopolitical front. Our baseline scenario remains a temporary “Phase 1” trading deal between the US and China and an orderly Brexit, yet investors are right to ask: quo vadis investment year 2020?

Despite possible progress in solving the problems described above, the challenges will hardly diminish in the coming weeks. The markets are too heavily dependent on the cheap money of the central banks (Federal Reserve, European Central Bank and Bank of Japan). There will also be another interesting factor in the form of the upcoming US elections in November 2020. The starting position of Donald Trump as the re-election favourite seems clear, but the risks should not be underestimated, especially in the first half of the year. With this setup, the Investment Committee of LGT Private Bank Europe has decided to pursue a dual strategy. On the one hand, the build-up of the European equity quota corresponds to the global economic growth of still more than 3%. On the other hand, the further expansion of gold will provide a hedge against uncertainty and volatility in a balanced portfolio.

Equities: relative attractiveness speaks for Europe – increase to “overweight”

The macroeconomic figures from Europe are still not exhilarating and can at best be described as stabilisation at a low level, but we are miles away from euphoria. The euro area was hit hard by the trade war between the US and China because of its export focus, especially due to Germany's high dependency on trade. With a potential temporary agreement, we expect this region to have a corresponding catch-up potential. Moreover, the relative valuation is attractive and the dividend yield is high. These are the reasons for an increase of the ratio in European equities.

We are rebalancing the other regions and are thus selectively realizing profits in the USA. At a sector level, pharma remains our number one. In the coming months, we will focus on selection, as it is becoming increasingly important to focus on the important sectors and industries in a market environment currently dominated by central bank interventions.

Fixed Income: selection continues to be the focus

Although interest rates have risen slightly at the long end in recent weeks, the situation on the bond market has hardly improved sustainably for private investors. Although the yield curve has become slightly steeper, however, there is hardly any reason to significantly extend the duration. We recommend to keep maturities shorter than in the benchmark index. We continue to see potential for corporate bonds, as credit risk premiums should remain attractive for the near future.

However, due to the late-cycle economic environment, selection is key. We remain constructive with emerging market bonds and are only waiting for a weak phase of the US dollar in order to be able to invest in local currency bonds. We believe that patience will pay off in this asset class as well. Regarding high-yield bonds, we still see no reason to invest. Corporate-like risks should be taken on the equity side.

Alternative investments: building up gold and hedge funds

After the recent consolidation, we are increasing our allocation to the yellow precious metal and further expanding our overweight. The outlook for gold remains intact. Opportunity costs are low due to the current low or negative interest rate environment. Gold is also well known as a good hedge against emerging volatility in the equity market. We think that with further balance sheet expansion of the global central banks – the ECB has already started another quantitative easing programme – gold will continue to be in demand as a value-preserving investment category.

We are also increasing the hedge fund quota from “underweight” to “neutral” at the expense of insurance-linked bonds. Also due to the non-correlating properties, we are thereby adding further stability to the portfolio in the current late-cycle environment.

What we like What we dislike


European equities


Fixed Income

Short-term US Treasuries

Investment grade bonds

Swiss government bonds

EU government bonds

High-yield bonds

Long duration



Listed Private Equity



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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Author: Thomas Wille, Head Research & Strategy, Email:
Editor: David Wolf, E-Mail:
Source: LGT Bank (Switzerland) Ltd.

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Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail:
Quelle: LGT Bank (Schweiz) AG
Konsumentenpreise (J/J)
MEZLandIndikatorAktuell09:15ESMarkit PMI52.109:45ITMarkit PMI50.109:50FRMarkit PMI51.709:55DEMarkit PMI51.410:00EUMarkit PMI51.510:30GBMarkit/CIPS PMI49.710:30EUSentix: Investorenvertrauen-5.815:45USMarkit PMI51.616:00USISM PMI: Dienstleistungen55.1