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LGT Asset Allocation – January 2020

January 7, 2020

The increased geopolitical uncertainty is an additional risk factor for the stabilization of the global macroeconomic environment. In a multi-asset portfolio we pursue a barbell strategy with an overweight in gold and equities. Gold is our preferred asset class in alternative investments, but we recommend to wait for a pullback after the strong price performance in recent months to increase positions.

Asset Allocation LGT Private Banking Europe

US President increases geopolitical uncertainty

In recent weeks, market participants have been rightly hoping for first positive signals in the trade conflict between the two superpowers, the USA and China: in mid-January 2020, the signing of the so-called "Phase-One Deal" is expected. However, after the easing of tensions in this complex geopolitical conflict area, hopes for calmer times and thus for a more rapid stabilization of the global economy have been dashed abruptly now that US President Donald Trump is on a direct confrontation with Iran. The new crisis source could in extreme cases result in an oil price shock, which in turn would abruptly stifle the recovery of the economies. Although this is an unlikely risk scenario at the moment, it should be borne in mind that 2020 will be an election year in the US and that due to the ongoing impeachment proceedings President Trump will try to divert the media attention away from the impeachment to world events. The silver lining, however, remains that on a global basis the aggregate environment is beginning to stabilize not only in the developed but also in the emerging markets.

We remain committed to our dual strategy: an overweight in gold and quality stocks at the expense of bonds, as these are unattractive by historical standards compared with equities due to the renewed monetary stimulus from the ECB and the Fed. We are keeping the liquidity ratio close to a neutral position.

Equities: focus on selection following the year-end rally

Not only did the global equity markets continue to rise in December 2019, they also had a strong fourth quarter and an excellent full year 2019. One downside, however, is that more than 90% of this performance is attributable to a valuation expansion – a so-called P/E expansion – and less to effective earnings growth. In part, this can be justified by the low interest rate environment, but we believe that the next boost must come from the earnings side. The prospects for such a future development are still intact if the global economy continues to recover, but selection is becoming increasingly important, as the overall market is no longer cheap in absolute terms. Therefore, after the strong price advances of recent months, a consolidation of the stock markets and a related strong rotation within individual sectors can be expected.

Within the equity allocation, we continue to prefer high-dividend European equities as well as global stocks from the healthcare industry. In the case of stocks with strongly increased valuations, we recommend to take partial profits.

Fixed Income: The quota for fixed income investments remains underweighted in a balanced portfolio

The G3 central banks (Fed, ECB and Bank of Japan) will continue to keep the short end low, with better growth data and the continued easing of monetary policy likely to result in a steeper yield curve. This also means that we continue to recommend a short residual maturity relative to a benchmark index. The market expects further stimulus attempts, not only from the ECB but also from the Fed.

For a private investor with reference currency Swiss franc or euro, we see little or almost no potential for returns in the traditional bond segment. The return expectations for the next ten years are clearly below those of the last decade. For investors who want to take risks in a pure bond portfolio, we see potential in emerging market bonds and in low subordinated bank bonds (CoCos). For mixed mandates, we recommend taking risks primarily on the equity side or in alternative investments.

Alternative investments: Gold remains an overweight, but patience is required

The strengthening of the overweight in gold a month ago has already had a positive impact on the portfolios. However, the increase came very quickly and was due to the uncertainty in the Persian Gulf. The medium to long-term positive assessment for the yellow precious metal remains, but we recommend waiting for a period of weakness such as in summer 2019 to increase positions. The negative real interest rates and global monetary experiments by central banks make gold an indispensable component in any multi-asset portfolio.

What we like What we dislike


European equities


Dividend stocks

"Value traps"

Fixed Income

Short-term US Treasuries

Investment grade bonds

Swiss government bonds

EU government bonds

High-yield bonds

Long duration



Listed Private Equity



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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Author: Thomas Wille, Head Research & Strategy, Email:
Editor: Natija Dolic, E-Mail:
Source: LGT Bank (Switzerland) Ltd.

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Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail:
Quelle: LGT Bank (Schweiz) AG
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MEZLandIndikatorAktuell09:15ESMarkit PMI52.109:45ITMarkit PMI50.109:50FRMarkit PMI51.709:55DEMarkit PMI51.410:00EUMarkit PMI51.510:30GBMarkit/CIPS PMI49.710:30EUSentix: Investorenvertrauen-5.815:45USMarkit PMI51.616:00USISM PMI: Dienstleistungen55.1