Market sentiment
Looking ahead , the global economic outlook points to slower growth. While consumer spending is expected to remain positive, albeit at a slower pace than last year, some benchmark investors are showing signs of caution. For example, Berkshire Hathaway’s cash position will probably reach $200 billion by the end of the current quarter, said Warren Buffett. This indicates that Buffett is “bearish” on the stock market right now. For W. Buffet, “the more sophisticated, complicated and intertwined the world becomes, the more likely things are to go wrong, and you have to be able to act when that happens.” The high prices of US technology companies remain a cause for concern. As Aswan Damodoran points out: “Corporate governance is dead in tech companies”, and the risk of disaster is not factored into their valuation.
Investing in China
China remains a key destination for international investors, despite economic headwinds and geopolitical tensions. Ray Dalio emphasizes the importance of investing in China for diversified, uncorrelated returns. In his view, China’s manageable economic challenges and its leaders’ willingness to engage in quantitative easing and debt restructuring offer opportunities. Dalio advocates buying into the market when sentiment is low and valuations are attractive, which he believes is currently the case for Chinese equities. He adds that he doesn’t jump in when the going is good, and doesn’t pull out when the going is tough, and doesn’t see himself as a “fair-weather investor”. Diversification requires China, because China and the United States are the only dominant powers in the most important sectors. Joe Tsai (Alibaba) on hedging bets in AI: “when you see a fork in the road, take it””
Investment vehicles
Investing via ETFs in Switzerland
ETF savings plans are growing in popularity, particularly in Switzerland, where they offer a cost-effective way to invest on a regular basis. These plans enable investors to build wealth over time through regular contributions and low fees.
Foreign banks and online brokers (e.g., Degiro) offer such plans. Some regional banks, such as certain cantonal banks, offer passive funds in their savings plans at competitive prices. Digital platforms launched in recent years are spearheading the availability of ETF savings plans, making them accessible to a wider audience. These plans often replicate market indices, offering broad diversification and lower risk than individual stocks.
Beware of leveraged ETFs
As noted by the U.S. regulator SEC last year, leveraged ETFs can “deviate significantly” from the expected trajectory, particularly in unstable market phases. They may even diverge, since the leveraged movement is calculated for each day is calculated as a percentage. Over time, therefore, a distortion is formed when daily movements in the equity market are large and consistently opposite, and no trend emerges either upwards or downwards.
New BlackRock retirement plan (no rush)
BlackRock has introduced LifePath Paycheck target-date strategies, aimed at providing retirement income solutions. These strategies focus on growth through equity investments initially, gradually shifting to bonds as the participant gets closer to retirement. From the age of 59 and a half, participants can purchase annuities from insurers selected by BlackRock to secure an income stream for life, complementing the rest of the diversified investment portfolio. The question of annuity configuration and level remains open for international investors, but it will be interesting to follow this approach offering a combination of growth potential and a source of secure retirement income in the event of under-coverage by a state or occupational pension.
Practical conclusions for current investments
Given current market conditions and economic forecasts, investors may wish to consider the following approaches:
1. Adopt a long-term approach: If you are in an active phase of your working life, continue to invest regularly, without excessive hoarding, but without over-investing in relation to your plan, in view of the precautionary positions of benchmark investors such as W. Buffet.
2. Choose appropriate vehicles: You need to be aware of hidden risks, such as the over-representation of US equities in the MSCI World, or currency risk in foreign equity markets. You also need to be wary of hidden fees to be avoided when withdrawing money or carrying out other transactions, as the cost structure is not always more transparent in neobanks than in traditional banks.
3. Use ETFs for diversification: Use ETFs to gain broad market exposure and reduce risk. Regular investments in ETF savings plans can help build wealth over time, with lower fees than actively managed funds, but higher than a do-it-yourself approach. Always be careful with leveraged ETFs or inverse ETFs or inverse leveraged ETFs move in the opposite direction to the underlying.
4. Sorting out the China question for you in portfolio diversification: All markets, including China, must be judged by their price relative to fundamentals. The time to buy is when everyone rejects a market and it’s at the right price: that’s currently the case with Chinese equities. Despite the risks (potential conflict or adverse measures by the regime affecting investors – called landmines by The Economist) Ray Dalio recommends at least 15 uncorrelated yield streams and sees China as one of those sources where valuations are low and sentiment is negative, like China, in order to benefit from a potential rebound.
Sources:
Günstiges Investieren für alle?, Neue Zürcher Zeitung, 11.05.2024
Letter to shareholders, Jamie Dimon, Chairman and Chief Executive Officer, April 8, 2024
Liebe Anlegerin, lieber Anleger, Finanz und Wirtschaft, 11.05.2024
To Answer the Question of Why I Invest in China, Ray Dalio, 1.4.2024
Guide Finances 