The global recession is coming - liquidity is the order of the day
Munsbach, 24th March 2020 – In many respects, the coronavirus is leaving its mark. Public life, the economy and the capital markets have all been hit hard. "We are currently seeing a proverbial Black Swan with all its scope and consequences," says Michael Blümke, one of the Lead Portfolio Managers of the Ethna-AKTIV, Ethenea's flagship fund. The economic impact caused by the global spread of the virus and the measures taken to contain leave little doubt that a global recession is no longer probable, but certain.
According to Blümke, the coronavirus itself is not responsible for the deterioration of the economic situation – instead it is the countermeasures implemented so far: "It is imperative that monetary measures are followed by government stimulus packages. Although these will only take effect over time, a clear commitment in this regard could be sufficient to calm the capital markets. Until then, we expect risk assets to remain highly volatile.”
However, not only is there a lot of movement: in the current market situation, all investors are drastically reducing their positions in all asset classes. "We are currently experiencing a deleveraging process. Regardless of which assets are involved, everything is being sold. We went through the same phase in 2008, and it is coming back," says Luca Pesarini, one of the Lead Portfolio Managers of the Ethna-AKTIV and Chairman of the Board at Ethenea.
Nevertheless, Pesarini is convinced that, as was the case during the financial crisis, he will be able to navigate through this difficult phase thanks to a well thought-out positioning: "At ETHENEA, we weathered the financial crisis with limited losses and we will also survive this crisis situation. We want to retain our liquidity, we will remain defensive and will not take unnecessary risks. However, a forced liquidation is out of the question for us - this is not conducive to share and bond prices."
In the Ethna-AKTIV, Blümke and Pesarini are currently concentrating on a well-positioned portfolio with a focus on high-quality bonds. Although in recent weeks, even safe havens such as government bonds and gold have been sold, according to the experts, this should be a temporary effect that will be reversed. "Now is not the right time to get back into to risk assets. As soon as further measures are implemented and a recovery in the credit market becomes apparent, we can quickly rebuild our equity exposure via our derivatives," says Blümke.
At present, we are more likely to see opportunities in interest rate management and even more through currencies. Here, the US dollar and the Swiss franc are attractive. "The US dollar in particular has proved to be a safe haven over the past few days. We see further upside potential here and will continue to overweight the US dollar accordingly", says Pesarini.
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