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FK: Market Commentary A Publication of

Finanz Konzept AG

2nd Issue 2018

News: New Website:

Finanz Konzept AG à continue reading on page 9

Stock Markets: Volatility Is Back and Forces Investors To Be Cautious à continue reading on page 5

Bond Markets Dual-Currency Bonds as Yield Generators in a Low-Interest Environment à continue reading on page 6


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Table of Contents

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Editorial

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Short Summary

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Stock Markets

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Bond Markets

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Forex Markets

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Commodity Markets

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News

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Our Services Portfolio Analysis

Imprint Publisher: Marketing: Composition: Assistance: Frequency: Design: Images:

Finanz Konzept AG Schulhausstrasse 42, 8002 Zurich, Switzerland Lars Oberle, Daniel Kรถchli Daniel Kรถchli Nicolas Jordan, Jeremy Blaser Quarterly Tim Has Milan Rohrer, Josefstrasse 20, 8005 Zurich

Disclaimer This document was created by the Finanz Konzept AG. The opinions stated in it are the property of the Finanz Konzept AG at the time of compilation and can be revised at any time. The market commentary is only intended to provide information and to be used by the recipient. It neither represents an offer or a request on the part of the Finanz Konzept AG to purchase or sell stocks and bonds. Reference to the performance in the past is not to be understood as an indication for the future. The information and analyses contained in this publication were compiled from sources, which are regarded as reliable and credible. However, the Finanz Konzept AG is not responsible for their reliability or integrity and disclaims any liability. Assets in foreign currencies are subject to change in currency exchange rates. Neither this document nor copies thereof may be sent to the United States or taken there or be distributed in the United States. It is possible that the distribution in other countries can be restricted by local laws and directives. This document may not be copied without the written approval of the Finanz Konzept AG. Order the Market Commentary: via E-Mail: info@finanz-konzept.ch via Post: Finanz Konzept AG Schulhausstrasse 42, 8002 Zurich, Switzerland

FK: Market Commentary 1st Issue 2018


Editorial

Dear customers of Finanz Konzept AG, dear readers! The start into 2018 was marked by economic and political turbulence. A record-breaking January on the stock markets immediately followed by a mini-crash at the beginning of February and an extremely volatile market structure towards the end of the quarter, made this quarter challenging and challenging, but also exciting and eventful. But there was not only a lot going on in the markets, Finanz Konzept AG also underwent a modern reorientation, which resulted in the launch of a new company website. In this issue of our Market Commentary we will give you an overview of the events of the past three months and will try to classify them to explain both the causes and the effects of past market fluctuations. Once again, President Donald Trump’s policy was the main topic of discussion and led many investors to speculate and sometimes rash actions. Both the tax reforms, which boosted the American economic engine, as well as the threat of possible protective tariffs and the associated fear of an imminent trade

war, occupy the entire world. But what impact do these issues have on equity markets, bond trading or commodity prices? In this market commentary, we asked ourselves these questions and dared to look forward to the coming months with targeted analyses. We wish you an exciting read! Yours sincerely, Lars Oberle Director

FK: Market Commentary 1st Issue 2018

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Short Summary Money and Capital Markets 31/12/2017

31/03/2018

3 Mt.

12 Mt.

CHF

-0.069

0.024

à

EUR (DE)

0.427

0.494

GBP

1.188

1.343

USD

2.405

2.741

JPY

0.050

0.046

à

à

• •

Emerging Markets Currencies with a high carry Interest spreads of high-yield bonds still too high

We recommend: • Keep Cash-quota of EUR and CHF high in order to seize shortterm opportunities. • Shortterm US corporate and government bonds (USD) • Reduce long-term bonds (CHF, EUR) • Reduce high yield bonds

Stock Markets 31/12/2017

31/03/2018

3 Mt.

12 Mt.

SMI

9,381.90

8,766.71

EUR Stoxx 50

3,504.00

3,335.69

FTSE 100

7,687.80

7,044.74

S&P 500

2,673.60

2,640.87

Nikkei

22,765.00

21,392.42

DAX

12,917.00

11,956.34

à à à à à à

à à à à à à

• •

Increasing volatility or risk sensitivity indicates top formation Lateral movement of the market likely

We recommend: • Overweighting of European equities • Underweighting of US technology stocks • Use positive market phases to reduce shares

Forex Markets 31/12/2017

31/03/2018

3 Mt.

12 Mt.

EUR/CHF

1.1700

1.1755

à

à

EUR/USD

1.3170

1.3373

à

EUR/JPY

0.9750

0.9539

à

GBP/CHF

1.2010

1.2331

USD/CHF

135.40

131.04

• • •

EUR/CHF close to fair value EUR/USD in a sideways movement in the short term JPY strongly undervalued

We recommend: • EUR/USD neutral • CHF neutral • GBP neutral • JPY overweigh • emerging market currencies with selective potential

Commodities 31/12/2017

31/03/2018

3 Mt.

12 Mt.

60.42

64.94

1,302.80

1,320.83

Silber (USD)

16.93

16.37

à

Platin

931.00

932.00

à

à

Rohöl WTI (USD) Gold

(USD)

(USD)

• •

Crude oil currently rather overvalued Silver undervalued with anti-cyclical opportunities

We recommend: • Hold precious metals for portfolio diversification

Crypto Markets 31/12/2017

31/03/2018

3 Mt.

12 Mt.

13,800.00

6,939.33

ETH (USD)

756.73

394.2110

XRP (USD)

2.30

0.5003

à

BCH (USD)

2359.30

686.1266

LTC

227.2237

116.2581

à

BTC

(USD)

(USD)

FK: Market Commentary 1st Issue 2018

• •

Bubble correction still in progress Short-term recovery waves possible

We recommend: • Interested investors can take advantage of low entry prices to buy cryptos and use them as a portfolio diversification tool


Stock Markets

Volatility Is Back and Forces Investors To Be Cautious The start into 2018 offered everything to keep investors on their toes. After months of low volatility and steady growth, which peaked in January of this year, the correction was expected in many places at the beginning of February, but ultimately surprisingly strong. The better-than-expected US labor market data, the associated fear of rising interest rates and the impending end to expansionary monetary policy, led to a return to volatility. The VIX, the index that measures the expected market fluctuation and is commonly known as the socalled fear barometer, almost doubled on February 6. The question that arises subsequently is whether the resulting price correction will result in a longterm downward movement or whether the market can catch up again and continue its upward flight. Although all stock markets lost the value growth achieved in recent months within a few days, the first scenario is unlikely. The reason for this lies in the origin of the mentioned mini crash. Ironically, the mini-crash mentioned above was preceded by “too positive� economic data in the USA, which in turn are a clear sign of the current strong global economy and therefore do not (yet) form a basis for a continuing long-term correction movement. Nevertheless, the strong and rapid correction was a warning shot for all overly optimistic equity investors and shows us that we are close to the peak of this equity cycle. The period of steady, almost careless growth seems to be over. As a result of the return of volatility, investors will once again react more critically to economic data, statements by central banks and political developments. The policies of US President Donald Trump have been clearly negative in recent weeks. After the introduced tax reforms let the American economic engine run hot, it has started discussions about a possible trade war by the planned introduction of protective tariffs for aluminium and steel. However, their implementation

and the possible consequences remain difficult to assess, which is why the reaction of the markets has so far been rather restrained. It should be noted that sentiment remains fragile both economically and politically and that it will become increasingly difficult to forecast possible market reactions by central bank or government decisions in the coming months. The current phase in the very advanced economic cycle is very demanding. On the one hand, an investor must not be too intimidated by short-term price fluctuations; on the other hand, the time of carefree euphoria is definitely over, since the probability of negative surprises has also increased with the return of volatility. However, this is not likely to be a new situation for experienced investors; after a phase of uninterrupted optimism, it merely represents the normal state of day-to-day trading on the stock exchange. In the coming months we expect a transition to an overriding sideways movement on the stock markets. Stronger recovery on the stock markets should be used to reduce the equity ratio. Volatility Index VIX 40 35 30 25 20 15 10 5 0

FK: Market Commentary 1st Issue 2018

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Bond Markets

Dual-Currency Bonds as Yield Generators in a Low-Interest Environment Besides the stock markets, bond markets are of course also significantly influenced by fiscal and monetary policy measures. Central bankers in both the US and Europe are currently on an extremely tight ridge. On the one hand, the positive economic data, such as low unemployment and high wages, increase the pressure on the prevailing price level and thus on inflation, which makes a tightening of monetary policy seem inevitable. On the other hand, the still positive but fragile market sentiment is not to be overturned by carrying out such a tightening too early, too quickly or too aggressively and thus destroying the achieved economic growth of recent years, in a short period of time. So-called dual-currency bonds from emerging countries with high S&P ratings and short maturities are one way of profitably exploiting the Eurozone’s ongoing low interest rate policy in the bond market. The significantly higher interest rates in these countries can generate a positive carry (interest rate differential to the benefit of the investor) and thus skim off a positive return. Although emerging market currencies are naturally subject to much higher price fluctuations, the default risk is manageable due to the high ratings (AAA-A). Emerging markets are

currently benefiting from the strong global economy in combination with controlled inflation, which is why it can be assumed that the associated currency risk will remain reasonable. The best way to benefit from this combination is to use the dual currency bonds mentioned above, where an investor can avoid expensive currency conversion by the custodian banks. The hidden margins when converting the reference currency into exotic currencies are considerable and the availability of exotic currencies is sometimes very limited. Investments in dual-currency bonds are usually only denied to large investors with appropriate market knowledge and access to over-the-counter trading. Thanks to our expertise and experience in fund management, we are happy to offer you exclusive access to these instruments upon request and a detailed needs assessment and advise you personally. It should be noted that, despite the currently positive market environment, currencies from emerging markets always carry high risks which should not be underestimated, which is why such investments should only be used as diversification instruments and should under no circumstances be overvalued.

Fondsstructure of the Triple Opportunity Fixed Income Fund USD RUB MXN COP IDR INR Other

FK: Market Commentary 1st Issue 2018


Forex Markets

The Yen Recovers Strength - the Euro and the US Dollar Struggle The strengthening of the euro that took place last year continued in the first quarter of 2018. Meanwhile, the EUR/USD pair is floating in the 1.22 to 1.25 range. Such a lack of movement rarely persists for a long time. In the second quarter, a decision on the further course is likely to be taken, leading to a strong and rapid change in the share price. The import duties demanded by Donald Trump are obviously also having an impact on the foreign exchange markets. It seems that Trump wants to punish China in particular for its expansion and export strategy of recent years and reduce the resulting record trade deficit with China for the USA by means of tariffs amounting to 50 billion dollars. The aim of these measures is to strengthen the economy by consuming fewer export products and more domestic products. As a result, products are becoming more expensive for consumers and, in addition, domestically produced products can only be sold abroad at a larger discount. Such a policy, coupled with the rising budget deficit resulting from the tax reform, will inevitably lead to a weaker domestic currency, which is why it is likely that the dollar will tend to depreciate in the long term. The US President has provisionally excluded the EU from customs duties vis-Ă -vis the EU at the last second. Nevertheless, uncertainty about future tariffs remains like a sword of Damocles above the EUR/USD currency pair. It remains to be seen how this will affect the euro/dollar ratio in the short term. The European common currency is also under pressure due to the current market situation. With

the expansionary monetary policy of recent years, the central bank has already played its greatest trump card when it comes to boosting the economy. Should there be an economic turnaround in the near future, there are not too many monetary policy alternatives. Fiscal policy would then have to take the helm and initiate tax reforms. If the EUR/ USD falls below 1.22 at the end of the day, a rapid sell-off to 1.20 or 1.17 is inevitable, as record high speculative positions would be built up on the Euro and a fall below 1.22 could lead to panic EUR sales. We therefore recommend hedging EUR/USD via 1.2150 (stop-loss mark) However, the Japanese yen will also be interesting to watch in the coming months. For some time now, the currency from the Land of the Rising Sun has been heavily undervalued against the major currencies. The fair trade-weighted rate (purchasing power parity) of USD/JPY is between 87 and 75, which corresponds to a deviation of 20-30% at a current rate of USD/JPY of approx. 105. Despite the aggressive monetary policy of the Japanese Central Bank, the gap between the currencies of these two industrial nations will continue to close. The Yen is similarly undervalued against the EUR. Like the Swiss franc, the yen is a suitable crisis currency to protect oneself from surprises, which is why we are using the yen to diversify the increased cash reserves. This is to the expense of the Swiss franc, which is currently valued very fairly against the USD and EUR and offers less potential.

FK: Market Commentary 1st Issue 2018

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Commodities

How Are the Raw Materials Performing in a Fragile Market Environment? The return of uncertainty in the markets also had a significant impact on commodities such as oil, gold and silver. The first shock wave from the explosion of volatility still left little trace on the commodity markets. The second wave of corrections triggered by the protectionist trade policy of the USA and the resulting increase in political risks then affected the commodity market. Oil reacted negatively to the impending trade dispute in the short term and gold shone for a short time. Silver continues to go unnoticed by investors. Crude oil literally skyrocketed in both the first and last months of this quarter, resulting, for example, in European Brent Crude Oil even cracking the $70 mark while American WTI rose to over $66 per barrel. This development is not only due to the curbing of oil production in the OPEC countries and the recently lower than expected oil stocks in the USA. It can also be seen that a lot of speculative money is currently circulating in the oil market, driving up the price of Gold-Silver Relation of the Last 12 Months 84 82 80 78 76 74 72 70 68 66

FK: Market Commentary 1st Issue 2018

the black gold. For this reason, we believe that a barrel of 70 dollars is too expensive and the actual equilibrium in the current market environment ranges between 50 and 65 dollars. We increased the range by USD 5 in the last 12 months due to higher global demand. Strategic commodity investors should also pay attention to the classic precious metals gold and silver. These have suffered from the extreme stability and security of the market, especially in the course of last year, were only held in portfolios as small hedges ordiversification and thus hardly yielded any returns. However, with the return of volatility and the prevailing political uncertainties, precious metals could regain popularity. Looking at the correlation of the gold price with the development of share prices, it is striking that gold is still a very welcome escape when prices fall. At the same time, however, this also means that a recovery of the overall market - as already mentioned, the final turnaround has not yet taken place - could again have a negative impact on the gold price. The development of silver will certainly also be interesting to observe. The gold/silver ratio shown below illustrates that it has continued to increase strongly over the past year. The value of one silver ounce compared to one ounce of gold is historically undervalued and offers an anticyclical entry opportunity for courageous investors. Fundamentally, silver is not only used as jewellery, but is also important as an industrial metal. For example, its conductivity makes it suitable for the solar industry, the production of batteries or as a superconductor in electricity. All these factors lead us to paint a more positive picture of silver development in the future. We assume that this precious metal can lead to positive surprises in the long term.


News

New Website: Finanz Konzept AG “Only those who keep up with time will make a big difference.� This quote is more relevant than ever in today’s society. Technical progress and digitization are becoming part of every aspect of our daily lives. The financial and asset management sector is not exempt from this development either. Algorithmic trading, block chain technology, the associated crypto currencies and robo advisory are becoming an integral part of modern wealth management. Finanz Konzept AG, as an independent, flexible and open-minded asset management company, is actively shaping this prevailing change in order to provide you with the best possible investment options. In this spirit we present ourselves in a new digital look and cordially invite you to visit our newly designed homepage. In addition to traditional asset management, you will also find information on the new solutions mentioned, the possibility of having your portfolio reviewed by one of our experts or our current market comments and press releases.

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Our Services

Our Core Solutions for Your Personal Needs. Private and Institutional clients appreciate our independent and professional services in all the areas of wealth management and investment advisory. Benefit from our competence and experiences and join us as we head into the future. Wealth Management: • Active Asset Management • Advisory Mandate • Execution Only • • • • •

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Financial Services: • Real Estate Services • Asset, Liquidity and Retirement Planning • Legal, Foundations, Trusts • • • •

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FK: Market Commentary 1st Issue 2018


Portfolio Analysis

How Well Does My Portfolio Comply With Me? For many investors securities are an essential component of their retirement provisions, while others mostly want to maximize their ongoing income. For one, security is their main focus, while the other is prepared to accept risks in exchange for opportunities. The quality of a portfolio is therefore primarily measured by how well the investment strategy and investment goals fit together. A security portfolio is more than just the sum of individual shares and investment funds. On the one hand, we mix together the risk and yield profile of your overall portfolio on the base of your investment goals and your personal situation, on the other your current statements of deposited securities. We calculate probabilities of default and yield expectations and compare your portfolio with the benchmark (comparison index). We present this analysis to you, together with our proposals for optimisation in a personal conversation.

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Market Commentary 2nd 2018  

Market Commentary 2nd 2018