Gentle hope after weeks of chaos?
Luxembourg, 03 April 2020 – The chaos on the financial markets reached ever new dimensions: A “Black Monday” was followed by an even “blacker” Thursday, followed by additional at least deep dark grey weekdays, the Dax lost a third of its value. “Slowly, however, the markets are beginning to bottom out”, said Michael Jensen, Head of Asset Management and Managing Director at Moventum AM.
The initial shock of the drastic measures taken by European governments should soon be digested, and some investors will find that not all stocks should have been corrected as badly as is currently the case. “Although additional, abrupt price declines can never be ruled out entirely, we believe that the markets are slowly beginning to bottom out,” said Jensen. Real stabilisation, however, will depend on how the virus infection figures continue to develop.
Past experience provides a good indication: “In the past 20 years we have seen three crises, each of them so new that there had been no learned reactions available at the time: September 11, Lehman Brothers and, to a lesser extent, the euro crisis,” explained Jensen. “The current pandemic also belongs in this category.” With one distinct difference, however: in 2003, for example, there was a limited outbreak of the respiratory illness SARS in Asia. At the time, the markets also reacted with a sharp slump.
“We saw that the stock markets were declining for as long as the infection figures were rising,” said Jensen. “Once the number of new infections began to fall, the stock markets experienced an upswing again.” This is a pattern that may well apply to the current crisis also. The recovery both in terms of economic output and on the stock markets was rapid at the time, and there were pronounced catchup effects. Today, however, it is clear that the crisis is global and therefore has much stronger effects. “Although China has already overcome the peak of the infections, other countries and especially the USA are still before their peak,” added Jensen. Only when the peak has been passed will economic output pick up again. “The stock markets, however, might anticipate this scenario,” Jensen pointed out.
“As an investor, you can count yourself lucky if your portfolio has not gone all the way down in line with the markets,” said Jensen. As an example, the losses of Moventum’s offensive portfolio were only half those of the Dax. “And in Private Wealth Management, the loss is only in the mid-single-digit range,” Jensen highlighted. “This shows that while prudent action may not always produce maximum return, it does create a real risk buffer downwards”. And as a sample calculation: Investors who lost 30 percent will have to gain almost 50 percent to get back to the old level. “But if you have only lost 5 percent, you will already be back in the black with a 7 percent increase.”
Moventum Asset Management S.A. (Moventum AM) is a wholly-owned subsidiary of Moventum S.C.A. The management company, in which Moventum’s asset management expertise has been concentrated since the beginning of 2019, manages Moventum’s own funds and individual mandates as part of its asset management portfolios. As an independent financial service partner, Moventum S.C.A. is specifically addressing financial service providers such as financial advisors, asset managers, institutional investors and NGOs. Its services in asset management and asset building include a web-based securities investment platform focusing on funds, relieving financial advisors of administrative tasks, and integrating custody and account management for individual investors. Investment management tools, regulatory-compliant reporting and individual securities services are also part of the full-service range. Standardised fund asset management service with a sustainable, successful track record for the relevant risk/reward profiles complements the offering. The Moventum Group also enables institutional investors to outsource securities processing in its entirety. The MoventumOffice investment platform offers access to more than 9,000 investment products including funds and ETFs from more than 400 investment firms, including the use of analysis, reporting and support tools.
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