Buy the Dip

Equities

We have been offering advisory mandates since the beginning of this year. This allows our trading-oriented clients to benefit from our Buy the Dips trading strategy: We systematically look for shares that have suffered a setback (dip) during an upward trend. This can be used to build up a position. If the share then exhibits an above-average increase over a certain period of time, a sell signal is generated, as was the case with Euronext NV a week ago:

In this example, a price gain of 39% could have been achieved by implementing our proposal (holding period approx. 6 months). Of course, not every trade works out so perfectly. For a trading strategy to be successful, clear rules and disciplined implementation are needed, also to avoid negative surprises. Our proven method provides the foundation for this, e.g. by setting dynamic stop limits. Despite these safeguards, investment principles such as risk capacity and broad diversification must still be observed. Here again, we rely on our NEUE BANK traffic light. In bear markets, no buy recommendations are generated.

Just before this issue was published, the traffic light switched to yellow. This indicates a slight increase in the risk of setbacks, which is why we are reducing equity exposure to neutral.

Economy

Purchasing managers’ indices in China are still hovering around the expansion threshold. The index compiled by the business journal Caixin has even fallen below 50. Economies in the Far East suffered especially from covid measures. These measures were largely lifted at the end of August, however, so that the fall below the growth threshold might only be temporary.

“The index compiled by the business journal Caixin has even fallen below 50.”

In the US and Europe, indicators are still pointing to robust growth, even though momentum is weakening.

Bonds

Meanwhile, not only 10-year USD government bonds but also USD high-yield bonds are exhibiting negative real yield (yield minus inflation). This is due firstly to the record-low interest rate premiums and secondly to the jump in inflation. The question remains whether inflation will remain permanently high or whether the price premiums caused by supply bottlenecks will level off again. Either way, fixed-income investments are not attractive right now, so that we remain underweight.

Alternative investments

After both silver and platinum interrupted their upward trend in the previous month, palladium followed suit during the reporting period.

Our trend analysis aims be invested in these precious metals only during upward trends and to look for other opportunities during bear markets. In principle, we prefer gold for precious metal investments, given that the market is more liquid. Additionally, silver, platinum, and palladium are being used in more and more industrial goods, which increases their cyclicality and thus also their correlation with certain equity market sectors. Since April 2021, however, a listed private equity product has been our favoured satellite investment.

Currencies

Following the re-election of David Cameron in 2015, investor focus shifted to the Brexit referendum, putting the GBP under pressure. The downward trend, which lasted for about a year, led to currency losses of significantly more than 20% against the CHF and EUR.

“Since November 2020 and mid-January 2021, our currency monitoring has again pointed to an appreciating GBP.”

At the time, our trend analysis gave a good indication for currency hedging. This was followed by an extended phase without a clear trend. Since November 2020 and mid-January 2021, our currency monitoring has again pointed to a stronger GBP. Most recently, the Bank of England (BoE) communicated more rapid tightening of monetary policy, which could give the currency a further boost to finally overcome its extended sideways trend.

Downloads

Our Opinion September PDF, 1 MB