Ahead of the curve: Top 10 Convictions for investments

1. Social distancing

• Business models in which distance rules are easy to implement could have an advantage
• The industry should be able to recover faster than broad private consumption
• We recommend companies profiting from social distancing and having well-filled order books

2. Scarcity of earnings growth

• Central banks and governments are reacting to the slump with a massive flood of money
• Fundamentally sound corporate profits cannot be “printed”
• We favor companies with structural growth drivers and defensive qualities of their business model

3. Fallen champions

• Cyclical sectors, hit hard by the corona measures, suffered above-average price losses
• For these sold-out sectors there is a lot of fundamental improvement potential starting from low levels
• We like cyclical companies with leading positions and longer-term upside potential

4. Safe dividends in unsafe times

• Quality equities with high and stable dividends are particularly attractive in the current uncertain times
• Their relative attractiveness compared to corporate bond yields is historically high
• Dividends have a signal effect that reflects management's confidence in future business development

5. A watershed moment for sustainable investing

• During the recent turmoil, sustainable companies have generally outperformed the broader market
• They benefitted from the long bull market, but also came through the crash in good shape
• We expect diversified sustainable investing portfolios to offer more defensive characteristics

6. Covid-19 is a call for digital transformation

• The corona pandemic gives additional boost to digitization in many areas
• We believe that the current crisis will bring about a lasting change in behavior
• This opens opportunities in segments such as Fintech, Digital Health or Education Technology

7. Attractive investment grade corporate bonds

• Further rating downgrades are expected
• Investors should build positions in US dollar and euro corporate bonds
• Taking advantage of selective opportunities while remaining focused on quality

8. Corporate hybrids benefit from monetary policy

• As public stimulus is very credit-positive for large companies, corporate hybrids gained in attractivity
• Yield curves will remain contained on low levels which will trigger a renewed hunt for yield
• Return expectations are between 4-5% for this year, providing a decent risk/return profile

9. Gold is shining for many good reasons

• Gold enjoys structural tailwinds from risk, yield and monetary drivers
• Both fundamental and technical factors suggest that the rally is well founded
• Price upside remains intact and gold is a clear “buy-the-dip” asset

10. Long-dated US Treasury bonds, the good hedge

• Yields on long-term government bonds are currently rising faster than yields on short-term bonds
• Current levels of long-dated US Treasury yields appear fair
• Long-dated US Treasuries offer insurance against adverse market events and help to stabilize portfolios

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