Active Inactivity

Congratulations, no work activity all year and still were paid! No, this is not my job description, even if some days I wish it were true. However, the needs and interests of our clients always give me the next wave of energy and I am already reading, researching, discussing and checking theses. Riding the wave!

One thing that has not happened in the current year in Bank Gutmann's fundamental asset management mandates: frantic buying and selling on a weekly basis. Doing nothing is the default decision in the portfolio when there is no convincing argument for activity. If only, as there is a cost factor attached to it.

Watering flowers or weed?

Years ago, an interested client asked me, “Why don't you always sell at a 20% profit?” My provocative counter-question was, “Do you like paying taxes?” After all, every realized profit causes an automatic reduction in assets due to the payment to the taxman.

By the way, this strategy has a bad effect anyway. It has the effect of uprooting all the existing blooming flowers in the garden of investing, along with the roots, while the weeds of price losses run rampant. Not a good strategy for the future.

Easy does it

Back to Gutmann’s portfolio management. In January 2021, we raised the equity quota in the fundamental mandates to overweight. Due to the friendly stock markets, the equity component moved towards strongly overweight. In recent weeks, we discussed intensively in the Chief Investment Office about rebalancing back to simple overweight - i.e. selling some of the equities.

However, we decided against it. An active decision to inactivity, so to speak. Why? Even though the major indices are trading near their highs, there has been some movement beneath the surface. Individual stocks have already had corrections of over 20 percent. On average, a stock in the technology-heavy Nasdaq index in the U.S. fell 40 percent from its high for the year - even though the index was up strongly, thanks to individual large stocks. In addition, our important investments in Asia and Japan have not risen nearly as much as the USA, a region that is our main driver.

Then last week, the financial markets were also caught up in the great fear surrounding the new Covid mutation, Omicron. Our recommendation is to stay calm. Like our bodies, over time, markets tend to develop antibodies against scary disaster news. My thesis is that there will soon be effective vaccine protection against the latest Covid variant. Therefore, it makes sense to stay the course. The next variant is bound to come - but we believe the market reaction is very likely to get smaller each time.

Let us be happy and cheerful

We are heading towards St. Nicholas and Christmas and thus into a seasonally good stock market phase. The turn of the year is no guarantee for rising prices, but the probability speaks for it. In addition, the previously mentioned fluctuations under the surface offer interesting investment opportunities.

Therefore, here and there we pluck out the budding weeds in your investment garden and continue to water the most beautiful blooming flowers that promise us even longer joy and happiness.

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This is a marketing communication. Investments in financial instruments are exposed to market risks. Past performance or forecasts are not reliable indicators of future results. Tax treatment depends on each client's personal circumstances and may change in the future. Bank Gutmann AG hereby explicitly points out that this document is intended solely for personal use and for information only. Publishing, copying or transfer shall not be permitted without the consent of Bank Gutmann AG. The contents of this document have not been designed to meet the specific requirements of individual investors (desired return, tax situation, risk tolerance, etc.) but are of a general nature and reflect the current knowledge of the persons responsible for compiling the materials at the copy deadline. This document does not constitute an offer to buy or sell or a solicitation of an offer to buy or sell securities.

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