Monthly Asset Allocation Analysis: Economic Outlook and Investment Opportunities

Monthly asset allocation update available here.

Comment

We note that at the level of stocks, the negative underlying trend that began in certain regions is gradually extending to the global level. Obviously this is not a good thing, especially as we approach autumn, a period that is often quite turbulent on the stock market.

Swiss stocks are still in a slightly bullish phase, thanks to the nice rebound in July, but the trend is no longer as marked. Not to mention that valuations are very high. This market is still and always to be avoided as much as possible.

As for European stocks, they continue to play yo-yo, going fairly regularly from a bearish to a bullish phase and vice versa. Here, we fall back into a fairly negative phase. Despite correct stock prices in this region, this area must also be underweighted.

If we look at the US side, it's always the same sketch since it's the only market with very strong growth, but also the most expensive of all. The prices are totally disconnected from reality. The PE Schiller ratio and the Buffett Index are at levels similar to those in 1929 or 2000. Save who can!!! We can clearly see here the effect of Trump's short-term policy, which is both ultra protectionist and very favorable to businesses from a fiscal point of view. This effect has taken over from the Fed's very accommodating measures that were interrupted not so long ago. All this explains why the bull market has persisted so long in this region. Obviously, such an approach is just a headlong rush and does nothing to solve the underlying problems, such as debt for example. Quite the contrary. This will have to be paid for very dearly later on.

Canada, on the other hand, is the only region that still seems worthy of interest to me at the moment, with a very slightly positive trend (but also losing momentum) and valuations that are a little expensive, certainly, but still far from the Swiss and especially American extremes. Despite everything, even if the feeling is slightly good for this area, it is not a great enthusiasm either.

Japanese stocks are also entering a bearish phase for the first time. They have the great advantage of being particularly cheap, but this bearish phase is nevertheless problematic. As the saying goes, you can't buy a falling knife.

For emerging countries, it is exactly the same problem. This bearish phase has already started a few months ago, following the trade war initiated by Trump. It is interesting to note that US stocks and those of emerging countries are moving in exactly the opposite direction. While the former are climbing to the firmament and reaching totally irrelevant valuations, the latter are sinking while they were already cheap. It is clear that this anomaly will offer us nice opportunities when all this has stabilized and normalized.

Concerning the long-term bonds of the Confederation, no change, despite a slightly positive trend, they remain overpriced because of zero or even negative interest rates. Therefore, avoid them.

For gold, no change either. The price is attractive, but the negative trend that began a few months ago continues and is even pronounced. Here too, this can offer good investment prospects when prices have stabilized.

Finally, regarding real estate and alternative strategies, no change compared to last month.

In short, we see that at the moment, apart from real estate, and possibly Canadian stocks, there is nothing transcendent to get your hands on. This is the kind of period where it is better to sit on a good cash reserve, which can be taken out when the time comes.