The EAM in Geneva sets out its investment views, including that it is overweight equities and thinks evidence points to a market that is trying to find a floor.
Geneva-based Apricus Finance is overweight equities, commodities and gold as inflation runs hot and is underweight fixed income, the organisation said in its monthly outline of investment positions.
The external asset management firm (also interviewed by this news service here) explained its overweight equities stance by arguing that “recent, extremely volatile behaviour is usually typical of the market trying to establish a bottom.” It thinks that there has been a peak in bearishness among retail investors. It also argued that corporates are “healthy and investing.”
Wealth management firms are trying to judge asset allocation at a time when global equities have been pressured by worries about inflation; hence higher central bank interest rates, and the risks that supply chain disruptions, aggravated by the Russian invasion of Ukraine, could presage a recession.
“Central banks catching up with running hot inflation, the continued Zero Covid Policy in China, the war in Ukraine and people enjoying the return to normality post pandemic – with increased use of services – all contributed to the market fall in April, led lower by US technology and ‘new economy’ companies,” the firm said in a note.
“Just one year ago, many pundits declared that the pandemic had accelerated the ongoing trend of digitisation, streaming and tele-everything, and that there was no coming back. With the complete reopening of the economy, consumers found themselves enjoying shopping in person once again, travelling, dining out and being groomed at the hairdresser instead,” it continued.
“Company quarterly announcements from Docusign, Amazon, Netflix, Teladoc or Lyft, highlighted a sharp deceleration in revenue growth, (for Amazon, this being to levels last seen 20 years ago), or a sharp deceleration, or even loss, in the number of paying subscribers/users. Amidst extreme volatility, market reaction has been devastating, as quality tech companies started repricing for lower growth, while the so-called non-profitable tech sector started to discount the high probability of never actually reaching positive free cash flows or positive earnings,” it said.
Within its overall overweight stance on equities, Apricus is overweight Continental Europe, neutral UK, underweight US, neutral Japan and overweight Asia.
Bonds: the firm is underweight on the area as a whole, and specifically underweight high-yield debt in euros and dollars. However, it is overweight investment grade euro debt and dollar bonds, and underweight sovereign bonds. It has long positions on global inflation-linked securities, US municipal infrastructure bonds, hybrids and Asian bonds.
In currency terms, its portfolios are fully dollar hedged, and it has a long position on gold.
Among other details, the firm noted that the recent sharp fall in cryptocurrencies probably added fuel to selling high-quality tech stocks, as these are very often held as collateral for margin trading.
Apricus said the behaviour of cryptos suggests that they are not assets for turbulent times, such as economic and geopolitical crises, or as inflation hedges.