Better than the overall market: investors prefer defensive stocks

The volatility jumped yesterday, according to the VDAX to around 55 – the highest level in more than ten years. And, although the trading on the New York Stock

Better than the overall market: investors prefer defensive stocks

The volatility jumped yesterday, according to the VDAX to around 55 – the highest level in more than ten years. And, although the trading on the New York Stock Exchange was temporarily suspended. The volatility indices indicate a daily variation of about four to five percent. the Yesterday alone, the Dow Jones Industrial lost more than 2,000 points, or 7.8 percent, the S&P 500 lost 7.6 percent. Deutsche Bank's Strongest days of losses on the S&P 500

Also, government bonds were very volatile, with yields on ten-year US Treasuries reached temporarily 0.31 percent, but went for 0.54% of the market. The corresponding Bund yields fell to minus 0.91 percent and closed at a minus 0.84 percent. Should be expected, as the majority of market observers is the Situation as of the third quarter, relax, tends of the market to negative. The volatility is likely to remain with us for some time – hopefully, but not in these dimensions.

Oil prices slip from the

Because of the Saudi decision to increase Oil production and reduce prices, the price of the raw material yesterday, about 23 percent to under US $ 35 per Barrel. In this context, the prices of Oil companies have declined by up to 50 percent. It is estimated that the Supply of oil is likely to have exceeded the demand in the first quarter, to around four million barrels per day. the As US shale oil under an average profit take threshold at US $ 40 per Barrel, some reduce the production. This is likely to be sufficient, barely, to the Overproduction to compensate. And the price of Oil could continue to fall. At least Russia, whose Budget is covered to just under 40 per cent from Oil revenues, has indicated no willingness to compromise. In particular, the US Fracking should weigh on the markets for corporate bonds. The energy sector has a share of 14 percent of the U.S. market for bonds of poorer credit rating, the S&P 500, the share is only three percent.

investors prefer defensive stocks

Defensive sectors of the STOXX 600 have developed in the current year so far, better than the overall market. Because of the difficult-to-forecast global spread of the Coronavirus and falling yields, investors prefer the shares of companies with stable business models, clean balance sheets and consistent dividend payments. the This is set against the Background of the opaque situation in the medium term. Nevertheless, I recommend to risk-averse investors to keep the shares, the valuation of the company in mind. Deutsche Bank's valuation premium to the STOXX 600

While food and beverage companies – despite a relatively weak Performance in the second half of last year – currently, with a slightly above-average premium of 40 percent to the total market, are traded, are producers of goods of daily needs rated significantly cheaper. Since you also have a higher dividend yield, I would prefer this sector.

"luxury shares" have short-term pressure, long-term, interesting

luxury goods manufacturer, high margins, clean balance sheets, high cash reserves and strong potential in emerging markets and E-Commerce. Therefore, luxury stocks appear "" as a long-term Investment with appropriate risk-taking is interesting. In the short term, rates are likely to remain under pressure. In China was opened – the most important growth market in the industry – now most of the stores, but the customers remain. the After the drop in sales of 75 per cent in February, the losses in March are estimated to be 60 per cent – no real improvement. in Addition, are also likely to decline outside of China the revenue. For example, travelers with 40 percent, the largest group of buyers of luxury goods, since these are, for example, purchase by the VAT refund abroad are often cheaper. The looming decline of the passenger, a bad Omen is to pay for shares of luxury brands. For a start, it could be too early.

Coronavirus: turbulent times for Small and Mid Caps

Last week, the struggling British regional airline Flybe had to stop the operation. Due to the Coronavirus, the flight bookings were greatly decreased. I expect that in the coming weeks worldwide for more small and medium-sized enterprises bankruptcy need to register. the Because the debt of Small and Mid Caps has risen since the Great financial crisis – with the exception of Asia – global significantly. In the US, where the debt problem most seriously, is the ratio of net debt to pre-tax income, in the meantime, even as high as never before: Every fourth small and medium-sized U.S. companies running currently unprofitable. In the past, were triggered just unexpected shocks, most recently by the spread of the Coronavirus, the highly-indebted companies into bankruptcy, forced. Therefore, I advise, in particular, in the case of US stocks currently expect to use the fallen courses for entry.

the number of the day: 135

beer should be drunk fresh. Even more amazing is what experienced specialists of the research center Weihenstephan, as she tasted a SIP from the oldest surviving bottle of beer in Germany. the The beer of the private brewery Barre from Eastern Westphalia Lübbecke is 135 years old and was originally to America to be shipped. The expert's verdict is that it tastes like until today, "full-bodied, slim, and harmonious" – and would not recommend with almost four percent of alcohol for motorists.


Ulrich Stephan

chief investment strategist for Private and corporate customers

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Date Of Update: 10 March 2020, 12:00