November 18, 2020

Wealth management report

Wealth Management Report

COVID-19 has clearly become the single most important driver for financial markets over the last several months. After posting some of the sharpest losses on record in March, equity markets have shown signs of recovery recently, but remain below their peak levels from earlier this year. In the immediate future, the market is likely to focus on how quickly lockdown measures are eased and the pace of the recovery in corporate profits.

Intermittent lockdowns through 2020 mean that we only see a sustainable recovery from the beginning of 2021. How quickly the economy and corporate profits return to pre-crisis levels thereafter will depend on the success governments have in reducing bankruptcies and job losses.

Due to the corona crises the global macroeconomic data is heavily distorted and hard to read. However, it is in line with a breakdown and a sharp recovery after the corona reopening, as can be witnessed in China. Alpina is expecting a sidewards to slowly upwards sloping trading market. It has become more important to actively select the right investments.


The equity market looks optically expensive but investors focusing on 12-month forward multiples may not capture the full upside. Average earnings growth 30 months after a recession trough since the End of World War II implies a S&P 500 forward P/E 2022 of 15 times, which would mean another 15%-20% upside until the end of 2021. In our view the risk continues to be on to the upside.

Investors pay up for any extra growth. We expect an increasing growth divergence in the post COVID-19 world that is likely to play out in favor of US stocks.

The US growth stocks have risen to a new 45-year high versus value stocks, outperforming the latter by 6% per annum since 2007. We recommend investors to retain a preference for US growth stocks. The posterchild for US growth stocks, namely the Nasdaq 100, currently has a positive return for the year and is up 5.9%. US growth stocks have risen to a new 45-year high versus US value stocks.

Momentum remains strong and US growth stocks will probably resume their outperformance. Yes, US growth stocks are likely to enter a bubble, as investors finally throw in the towel on value stocks. US growth stocks will enter bubble behavior, as investors give up on value – stay overweight in US growth stocks.


The recession caused by the Covid-19 pandemic will test the institutional strength of the eurozone, but it will not break it.

It is a very usual reaction of the bond market to widen the spreads among the member states, as the chart below shows. We cannot rule out a period of financial stress, but at this point in time we assume that the eurozone will not break apart.


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European government debt levels are sustainable as long as the European Central Bank can keep refinancing costs depressed.

In the longer term, a return to fiscal prudence is necessary and likely, although the process could result in lower longer-term growth rates.


When GDP falls and deficits balloon, the debt-to-GDP ratio strongly increases. The following table compares the deficit projections of the European Union (EU) Commission in late 2019 and their latest projections in view of the fiscal response to the crisis and the contraction of the denominator, the GDP.


Source: International Monetary Fund fiscal response tracker, 9 May 2020

                                                         Source: International Monetary Fund fiscal response tracker, 9 May 2020


Total gold held by ETFs rose 20 percent this year to 99.3 million ounces, the highest level in at least 12 months. Gold advanced 14 percent this year to $1,727 an ounce.

Summary of ETF precious metal holdings:

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Upside comparison of financial crisis 2008 and current period:

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From a technical perspective gold just had a breakout as well. We still see room to grow for physical gold and hold it in our portfolios as central banks continue to print money, which leads to higher physical gold prices as seen after the financial crises, when central banks started to print money in big amounts. During that period gold appreciated more than 200% annualized. During the current crises gold already appreciated by a good extend, but we see still see.

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