Bank Julius Baer is optimistic about the development of the economy. But in one area, however, it advises the ultra-rich to exercise caution.
In order to be accepted as a client at Bank Julius Baer, people have to have a lot of money on the ‘high side’.
If this hurdle is overcome, millionaires receive an exclusive investment service, as muula.ch has already reported.
Watching over markets
In wealth planning alone, Julius Baer’s clients are supported by a team of over 120 specialists in tax advice, succession planning, relocation, retirement, philanthropy and family office services.
In addition, Group Chief Investment Officer Yves Bonzon and his experts monitor the global capital markets and regularly make recommendations to Julius Baer’s clients.
Few stocks make the difference
After an impressive performance in the first half of 2024, the markets are now ripe for a correction, Bonzon recently informed his well-heeled clientele, as muula.ch found out.
The financial market performance in the first half of 2024 was impressive, the report concluded.
However, the developments in both bonds and equities were driven by just a few stocks, the investment experts explained.
The gap between the market leaders and the remaining equities has widened since the low in April.
A few top names accounted for practically the entire performance.
Many investors will remember that in 2023, those “glorious seven stocks” with a focus on artificial intelligence. AI was responsible for almost the entire rally in the S&P 500.
Long-term upward trend
Concentrated market leadership is not a negative factor, per se, explained the Julius Baer capital market experts in their latest analysis.
However, the impressive rise that the stock markets have achieved since the low in October 2023 puts investors in a somewhat difficult position.
Although the sentiment indicators are not in extreme territory, and the price/earnings ratios still appear reasonable, the markets are ripe for a correction from a technical perspective.
This would be quite healthy and would even enable an extension of the long-term upward trend.
Alarm bells are ringing
“We see potential for a strong and rapid market correction in the coming summer months,” was the clear warning.
Investing is ultimately a subtle mixture of art, science and intuition, explained the capital market experts at Pictet, UBS & Co.
“Our intuition is currently ringing alarm bells”, Julius Baer continued.
Much more efficient method
Specifically, the famous Swiss bank recommends investing 15, 20 and 25 basis points respectively in portfolio hedging in the risk profiles called Income, Balanced and Growth.
This ‘parachute’ covers 4, 5 and 7 percent of the portfolios respectively.
This allows investors to dynamically reduce risk without having to resort to the direct sale of shares, the experts explain.
If the correction is particularly rapid, it is much more efficient to take this route than to have to decide when and where investors should re-enter the market.
IT and communications dominate
Hedging should be done in the market segment that is likely to suffer the biggest losses after also leading the rise: the US IT sector.
The widening gap between the S&P 500 and its equally weighted version shows how much the IT giants are currently overshadowing the rest of the market and confirms an ongoing consolidation in the latter.
This gap can also be observed in global equities, where the IT and communications sectors are pulling up an otherwise sideways index.
Value of the advise measurable
With such indications, Julius Baer shows the value of measured financial advice.
Depending on the size of the share portfolio of the super-rich, they can work out that it was worth listening to the Zurich-based bank Julius Baer in the event of an actual crash.
And if the markets continue to rise, the small hedge won’t hurt, but their wealth will continue to grow.
19.07.2024/kut./ena.
