AInvestors should use the strong price fluctuations in the Corona crisis to carefully expand their equity holdings. The Stuttgart asset manager Arne Sand advises this and sees a significant difference from the financial crisis that began in 2007 with the collapse of the investment bank Bear Sterns and escalated in September 2008 with the bankruptcy of Lehman Brothers. “Governments and central banks have learned from their mistakes, no longer set examples, but support the economy at all levels – not only in terms of monetary policy, but also through non-repayable grants and cheap loans,” says Sand.
Unlike in the financial crisis, when it took half a year for the share prices in Germany to bottom out after the Lehman bankruptcy, the asset manager suspects this time: “The lows are behind us, if it was already with lockdowns.” Then the stock exchanges would only have to deal with questions such as how long it will take before economic performance is reached again before the crisis.
Sand admits that he still considered such a scenario to be very optimistic in March. “We are close to the best case scenario we set up at the time.” In March it was by no means as clear as it is now that the economic downturn is likely to be only temporary and that a vaccine against Covid-19 will be available with increasing probability in twelve to eighteen months . It was not even clear whether the lockdown was a suitable way to curb the spread of the pandemic, Sand recalls.
International cooperation alone is still lacking. Nonetheless: “At the moment it looks as if the sustained damage to the economy remains manageable,” says Sand. “As long as nothing significant changes in this macro data, real assets, especially stocks, are the most promising investment in the long term.”
Because the interest rate level has sunk even lower due to the corona crisis and the following measures by the central banks. Generating positive returns from bonds has become even more difficult. “Of course, stocks are historically expensive in terms of key figures such as the price-earnings ratio, because for me as a Swabian it pulls everything together,” confesses Sand, but immediately follows; “In the relative view of bonds, for example, stocks stand out positively.”
But which shares should you buy now? “As you know, the stock market looks nine to twelve months ahead, and if the low point of the economy is really behind us, then the deeply cyclicals are the first choice,” says Sand. He thinks of companies like BASF, MTU or Boeing that could have the greatest potential to catch up in an economic recovery. “But these cyclics are also the most risky if there are still setbacks in the corona crisis.”
Sand is now looking more for companies that did not reveal a weakness in the business model during the crisis, such as the American tech companies Google and Microsoft. The Swabian, on the other hand, is skeptical as to whether the German automotive industry will be able to connect with competitors such as Tesla, who not only have an advantage in terms of electromobility, but also in the evaluation of data.
Risk management and the question of how much the 600 customers with around 400 million euros in assets of loss tolerance have brought with them have long played a role in asset management at Sand & Schott. What is relatively new, however, is that the equity quota in the customer deposits, if desired, is no longer managed with the help of market trend-following systems, but with macro data and the resulting recession risk. “It is not worth pushing yourself against the central banks. They often buy stocks when there are technical sell signals on the stock market and then make a false signal out of them, ”is one of Sand’s findings from the increasing involvement of central banks since the financial crisis.