Cluster Family Office Blog

The link between the fall in equity markets and the subprime crisis strikes me as exaggerated, but that does not mean it is any less of a dangerous scenario. As Kretan quite rightly points out in his latest post with regard to the RV, we are currently experiencing a period of high volatility and sharp swings, making it difficult to decide whether to stay in or get out.

As for the crisis in RF subprime It must be said that this is a sector that should have little impact on ordinary investors, as they tend to invest their assets in debt investment grade and, to a much lesser extent, in debt speculative. The thing is, with the uncertainty surrounding low-rated mortgage debt, also the credit spread of the debt prime It is being hit hard and in an alarmingly widespread manner. The pendulum effect is driving money towards absolute safety, right at the opposite end of the subprime spectrum, which has also had a negative impact on the performance of debt with very reliable ratings. That is why practically only US Treasury bonds have rebounded, causing their yield is significantly affected. However, the risk of investment grade remains virtually unchanged both before and after the US mortgage crisis. Therefore, this fall in the credit spread In our view, this presents an opportunity to acquire prime corporate debt at very attractive prices.

It is true that volatility is very high and that we can see corporate debt prime fall slightly further, or even considerably further if the subprime crisis worsens, with the resulting public outcry on the Russian markets. But perhaps it won’t. And even if we accept that prices may continue to fall, we consider current prices to be very attractive for building a position as a medium- and, above all, long-term investment, even in a scenario where there is a possibility ofFurther interest rate rises in Europe. We therefore believe this is a very interesting time to take positions in US fixed income as well, given that volatility is higher but the upward rally in interest rates is more limited. And what is most important to us: the outlook for US businesses is far more promising, given the current weakness of the dollar, than the corporate outlook in Europe. I repeat, this is always with a view to analysing these investments at least in the medium term.

Not all investors should be prepared to lose a significant proportion of their assets in the equity markets. Some should even be content with returns of almost double-digit figures for a substantial portion of their assets. However, for stock market investors who are only willing to take risks in exchange for short-term returns (whether good or bad), fixed income is unlikely to meet their expectations for speculation, nor will it even provide them with the adrenaline (ast) they want.

Many small and medium-sized investors may feel that fixed-income investments are not an option likely to yield returns that exceed post-tax inflation. But as I have said on other occasions, There’s life beyond fixed-term savings accounts. Especially when you have the ability and courage to see the crisis as opportunities.