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LGT Asset Allocation – May 2020

April 29, 2020

On the one hand, we do not chase the rally in the equity markets and, on the other hand, we believe an overweight in gold and liquid assets should guarantee stability and flexibility. Due to the strong global equity market performance in recent weeks, we recommend a “rebalancing“ and reducing the equity weighting back to neutral. For alternative investments we have increased “Listed Private Equity“ to neutral.

Asset Allocation LGT Private Banking Europe

Investors hope for rapid economic recovery

At present, the capital markets are concentrating primarily on the initial easing of measures against the corona crisis, but especially on the time of the “reopening“ of the US economy. It is not just a question of timing, but rather the speed at which a certain normality returns to everyday life. With a share of almost 20% of global economic growth, the US consumer is of significant importance, not only for the world's largest economy, but also for increasing global economic output. There are still many question marks over this very point: How deep will the recession get and when can we talk about normality again? At the moment, capital markets seem to be moving in only one direction. The year 2020 has been written off and the focus is already on 2021. Next year, markets seem to be already pricing in a normalization. But we believe that this scenario reflects too much hope and too little risk. Risks such as a second pandemic wave or a much slower-than-expected opening of the G7 economies. This would inevitably delay the path to normality.

The implication for our monthly investment strategy is, on the one hand, not to chase the rally on the stock markets and, on the other hand, to guarantee stability and flexibility with an overweight in gold and liquid investments. Due to the strong global equity market performance in recent weeks, we recommend a rebalancing to reduce portfolio drifts and thus reduce the equity exposure to neutral. For alternative investments, we increase “Listed Private Equity“ to neutral, as the valuation discount of this asset class is now attractive again in historical comparison, and with the enormous liquidity provided by the central banks, this category will probably also benefit.

Equity markets are already focusing on 2021

With the start of the first-quarter reporting season, investors had expected more clarity for the rest of 2020. However, the result is sobering, as the only clarity investors have received is that 2020 should probably be written off. The results are probably too imprecise, too vague and not sufficiently comparable with the actual potential of most companies on both sides of the Atlantic. The reaction was not long in coming and the focus has quickly shifted to 2021. This year, global central banks are standing by for companies and governments are standing by for consumers to “safely“ guide them into the next year. We believe that this attitude carries a great deal of risk, as it is questionable whether the economy, and particularly the US consumer, will then just “function“ again as before the corona crisis. We consider this risk to be considerable and therefore also place our primary focus on selection within the equity quota. The focus here is on companies with solid and strong balance sheets, a sustainable dividend policy and a leading position within the industry that have the potential to seize future opportunities arising from this crisis.

The US Federal Reserve shifts up a gear, adding high-yield bonds

Since the global financial crisis more than ten years ago, the most important central banks, led by the Fed and the ECB, have been, and still are, the central hub for the capital markets. In the corona crisis, the central banks have now intervened not only faster but also with much larger sums than they ever did. The Fed has even started buying up so-called “fallen angels“ - i.e. high-yield bonds that were investment grade before the crisis. In the medium to long term, this could develop into a classic “moral hazard“ problem, which would naturally lead to a gigantic misallocation of capital. Our focus in the fixed income area is on selection. We favour active managers who may opportunistically also hold a share in the high-yield segment, as this category is now also supported by the Fed.

Gold – the rock in the surf

The precious metal remains the rock in the surf or our ultimate insurance against further central bank experiments, respectively an enormous increase in the US debt mountain with a concomitant depreciation of the US dollar. Gold remains our only overweight in alternative investments. By contrast, we have reduced our underweight in “Listed Private Equity“ to neutral, as various negative factors (too low a valuation discount on net assets (NAV)) and rather restrictive central banks (Fed in 2019) have now been eliminated.

What we like What we dislike


US value stocks

European equities


Dividend stocks

Asia ex-Japan

"Value traps"

Fixed Income

Short-term US Treasuries

Investment grade bonds

Swiss government bonds

EU government bonds

Long duration





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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Author: Thomas Wille, Head Research & Strategy, Email:
Editor: Natija Dolic, 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