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By Benedicte Gravrand, Opalesque London:
Swiss private bank Reichmuth, based in Luzern, drew up an interesting scenario analysis in its latest newsletter ("Check-Up September 2009") – together with corresponding investment ideas.
Should the consensus be correct and the financial crisis be over, the economic crisis recovering by end-2009 or 2010, government deficits remaining high and inflation low, Reichmuth put forwards «bread and butter» portfolio of blue chips and bonds and riding the market’s ups and downs. This scenario has the highest probability of all (50% within a 6-month window).
Should central banks’ expansionary monetary policies cause new bubbles to form and surplus liquidity not be absorbed due to weak real economy, Reichmuth suggests blue chips, emerging markets, commodities, and gold and silver.
Should there be stagflation, where central banks’ extremely expansionary monetary policies undermine confidence in the value of cash, and the economy recovers only in nominal terms, the investment idea would be to go for inflation-linked bonds, stocks with pricing power, high dividend yields, low P/E ratios, stocks with cheap long-term debts and high intrinsic value (e.g. real estate companies) and, again, gold and silver. This scenario has the highest 18-month probability of all (50%).
Should there be a...................... To view our full article Click here
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