“Let’s put things into perspective. The German stock market is up 18% for the year,
Spain, the 3%, the Bovespa (the benchmark index of the Brazilian stock exchange), the 30%…I don't know what crisis there is”
Obviously, there can be no crisis for those who see it as a decline in their success fees or success fees. As long as their clients are generating positive returns that secure their profits, what else is there to worry about? In fact, the relationship Financo/Inversópata is based solely on satisfying everyone’s insatiable appetite day by day with bread for today, without the slightest concern for tomorrow’s hunger.
What’s more, Gustavo Trillo, Head of Management at JPMorgan Asset Management Spain and Portugal, acknowledges that:
“Our investment strategy has been temporarily disrupted. Before the summer, we were inclined to maintain equity holdings in our portfolios due to the favourable economic climate: the relative slowdown in the United States was offset by improved growth in the rest of the world. We felt that equities were the best risk-adjusted asset. With the crisis, stock market returns have fallen.”.
I can't believe what I'm reading! Could it really be that a director of management at an organisation
Will leading firms offer their clients more than just equities and the associated fees? Will they be able to offer their clients investment alternatives where their operating income per client plummets in favour of a new asset allocation, that can safeguard the well-being of their portfolios in an environment as challenging as the current one? Will we finally see a fund manager advising investors to underweight equities in favour of the current opportunities in fixed income and alternative investments? I continue reading the article, gripped by Mr Trillo’s previous paragraph, much like someone eagerly reading the dénouement of a thriller with a happy ending.
But here are the remarks from the newly appointed Head of Management at JPMorgan Asset Management Spain. When asked whether the credit crisis will have a negative impact on equity fundamentals, he replies without a hint of hesitation:
“It doesn’t have to be irreversible.” “It will be negative, but temporary.” Trillo highlights the stance adopted by central banks, particularly the Fed, in favour of economic growth. There is a new scenario, says Trillo, and it is positive for equities. How so? «When the Fed starts cutting rates—provided it’s not because of an economic recession—the stock market performs well for twelve months. That’s why now is the time to reposition ourselves to increase our exposure to equities and focus on those markets that are likely to perform best.”
Spectacular, the show must go on. The worst thing is that when investors are told what they want to hear, they tend to believe it hook, line and sinker. If the speaker is also wearing a smart tie and works for a prestigious financial institution, their words are taken as gospel.
But it’s not all going to be pearls In this article, we also come across statements which, whilst obvious, are by no means insignificant, such as the comments by Nicolás Llanás, Skandia’s head of investment in Spain: «The crux of the matter is that we must distinguish between the sectors most affected by the credit crisis and the rest.» referring to equities. And as for fixed income: «The only way to protect yourself is by adopting a very conservative strategy, focusing on sovereign debt and investment-grade corporate bonds. »To try and boost returns a little, you could round out the portfolio with some equities.’ As I said, it goes without saying, but in our view it’s entirely sensible and reasonable. In short, a breath of fresh air amidst all this pearl although, unfortunately, they are all lumped together under the generic terms of managers, analysts, specialists, etc…
I would like to make it clear that we are not specifically advising against investing in the stock market, but rather criticising attitudes that we consider, at the very least, erratic and not sufficiently focused on the client’s best interests, with attitudes that bread for today, more wood, or the show must go on. And what is best for each investor and their family is comprehensive advice that goes far beyond the basics.