Less Return with More Risk

Good Morning Ladies and Gentlemen,

My job is to make money for our clients. I do this by investing in capital markets, i.e. managing our clients’ capital in a volatile environment and in line with our clients’ mandates. I love managing assets. It is an exciting job that allows me to read books, research, newspapers, etc. and listen, and talk to interesting people.

Just another Job; no Art

However, Ladies and Gentlemen, managing assets is just another job; no art, just another job. A job that demands considering many different factors, acknowledging that the picture will never be complete and still having the guts of taking investment decisions for other people’s wealth.

Today’s Challenges for Asset Managers

Exogenous factors are increasingly determining stock market activity. While a relatively stable political environment and a stable (albeit escalating) monetary policy have boosted the economic prospects of private households and companies in recent years, political and monetary policy disagreements are now increasingly influencing financial markets. Moreover, next to the war in Ukraine, Central Banks seem less and less able to fulfil their mandate of maintaining purchasing power. As a result, I think we are entering a period of less return with more risk. Due to the mentioned political and monetary policy disagreements, I expect inflation to remain above the central banks’ targets for somewhat longer than anticipated.

Today’s Chances for Asset Managers

Where there are challenges, there are chances. I think it is fair enough to assume that Central Banks will only approach inflation with significant interest rate hikes as long as homeowners, pension funds- and financial market participants do not come under massive pressure. This, I think, is especially true for the U.S. because otherwise, consumption and therefore the economy will suffer big time. Classically balanced portfolios between bonds and equities are not good enough to bring positive returns in an environment like that. If low, if not negative real interest rates remain, portfolio structures will have to be aligned accordingly. The question is, how? That, Ladies and Gentlemen, depends on the personal perception of risk, personal risk appetite and personal risk capacity. I have always liked investing in production factors and positive cash flows. Therefore equities have always made up the bulk of my investments, and today, I would add cash and precious metals (preferably in the form of cashflow-positive miners).

Never forget

Investing, by definition, is for the long term. Therefore, do not try to find the right timing; very few people are good at this and can thus do it successfully in the long run. I know I keep repeating myself; please accept my apologies for it.

One last thing

If you are investing and want to continue investing but can barely handle the current, primarily negative, newsflow, you may want to stop reading newspapers too often, stop watching the news too often, and stop paying too much attention to the negative newsflow on your social media accounts.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to: smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, peace!

Yours truly,

Stefan M. Kremeth

Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li