The first quarter ended with markets fluctuating in a certain range, but in the last conferences of the quarter there was an evident inflow of capital and a boost of investment sentiment, which again drove stocks to an upward movement. In times when markets are fluctuating without direction, investors are often consumed in fruitless movements as they try to find themselves ahead of a trend, which, however, is not created.
The first quarter was characterized by three key investment issues.
1. The explosive rise in US treasuries’ yields. After an increase that reached 90% for the ten-year government bonds, there are now hints that this trend could have started to peak. Already, large investment firms have recognized that current levels are tempting and have increased their positionings. This is expected to pay off in the next period of time.
2. Rising interest rates have put pressure on Nasdaq and China. Technology stocks, as well as emerging markets, have been targeted by sellers. Pressures were particularly intense, in many cases the losses climbed to 30% or even exceeded it. There is no doubt that technology stocks inside and outside the United States have provided a huge opportunity for new long-term positionings.
3. The over-performance of Value stocks versus Growth stocks. The reopening of the economy is expected to seriously reinforce the Value stock sector. In addition, rising interest rates accelerated capital outflows from Growth stocks and their placement on Value stocks. Value stocks performed extremely well throughout the last month.
The following graph summarizes everything we describe above.
We assume that stocks are in a transitional decade. A decade, at which stocks will continue to outperform any other asset class. This is because there is no asset class that offers better returns and better prospects for the future. Interest rates are expected to remain low for most of this decade, even if inflation is at higher levels at some point. Long-term investors will focus on stocks again.
In our view, the sharp drop in Chinese stocks (mainly technology) has not changed China's long-term prospects in the slightest. There may be some "problematic" catalysts in the short term, but current valuations are a great opportunity for positionings and there is no better way to do this than through the Growth ESG portfolio.
In this decade investors need to be positioned in sectors that are expected to record the best returns. The XSpot Growth ESG portfolio aims to take advantage of this trend. Investments generate profits in the long run. There is no proper timing, there is proper and effective risk management and there is a large diversification in investment positionings. The decade we are going through will be a decade of significant change and change brings profits. Give your funds the opportunity to make their own "account" at the end of the decade.