The positive balance and challenges for 2020
We present a success story. Find out how our fixed income portfolio managers - with our clients as the main focus - made the best financial decisions to protect the profitability on their portfolios.
The positive balance for 2019…
The financial markets, supported by the actions of the world’s central banks, have performed very well during 2019, which has allowed us to offer our customers very significant returns in an environment of low-interest rates and moderate economic growth.
Our investment strategy throughout the year has paid off, especially for the most conservative investors, being positioned in bonds with high credit quality and long maturities.
…provides us with a challenge for 2020…
On the other hand, the high returns obtained during 2019 reduce expectations for those of the coming year, which implies that in 2020 we must be even more aware of asset valuations and of choosing the most appropriate investment strategy at each moment.
On a positive note, we can highlight the fact that we see a major difference in valuation between the different sectors and geographical areas, which will allow us to selectively differentiate.
In addition, our forecasts for the first few months of the year are positive regarding economic activity, which we think will allow us to once again position ourselves in some of the ideas that proved to be so profitable during 2019.
…where tactical vision and asset differentiation will be the key to success.
Now, more than ever, concepts such as diversification and a balanced approach to portfolios are particularly relevant. The current environment of demanding valuations and very low-interest rates imply that markets offer less natural value, so professional management and a suitable investment approach seem more important than ever.
Investors should keep in mind that the same apparent lack of value in financial markets occurs in the same way and magnitude in other markets such as real estate, where valuations are at a maximum with respect to disposable income, and private equity, which has been hit by valuations in the same way as traditional equity markets.
Finally, another point to consider is the high level of corporate and government debt, which, as we know from past experience, could imply a high default rate in the future, so we must be cautious when investing even if the coupons and promised yields are high. Some of these companies and governments have already begun to face their own economic reality and to fight for their own survival, something that in many cases is unavoidable.
Structural changes in the socioeconomic environment cause changes in the levels of central bank rates
The Central Bank of the United States (Fed) has again lowered the reference rates for the third consecutive time during 2019. Far are the forecasts of rate hikes at the end of 2018 when our forecast was, and continues to be, that the Federal Reserve won't be able to upload them for a long time (years) and there is still a long way down.