January 2021

Putting our societies back on good tracks


The year 2020 has shaken up and marked deep furrows in our lives, our societies, our economies, our ways of thinking and our political organizations; finding more serene and familiar paths in 2021 will be the global challenge.

The first half of 2021 will remain dominated by the fight against the Covid pandemic and its mutations, the support of the economy and employment.
Political changes will certainly bring variations in tone but will not instantly alter the panorama of global and individual challenges.

Governments will have to avoid social dislocation, promote a return to employment and accommodate this with increasing imperatives of sustainability.

There are few resources available in the short term other than vaccines and debt.


As visibility is poor, it would be overly ambitious to make forecasts for the coming year. On the other hand, there are deep-seated or temporary trends that can be exploited in the immediate future, investment opportunities that may need to be quickly unwound.


    Governments, the USA and Europe in particular, have the imperative and the desire to revive their economies. This “reflation” takes the form of (sustainable) investment programs, expansion of the money supply and credit as well as direct support.
    Electric mobility, renewable energies, sustainable development are the key words of the economic recovery programs. The USA will spend 2’000 billion and Europe 1’000 billion.


    The pandemic has accelerated the digitalization of our economies. This trend will continue for years to come and will extend to the world of healthcare (digital health) or to the “cloud”.


    As our societies emerge from the pandemic, then cyclical stocks will regain their appeal. There is still a need to focus on quality because not all so-called cyclical companies will be in the same boat. For example, the hotel industry is expected to recover later than other cyclicals, and within this sector there are companies that will benefit more quickly from any recovery in travel activity..


Negative nominal interest is the rule for short rates in EUR and CHF while USD is modestly positive. Real rates, adjusted for inflation, are all negative. These depressed rates and the money supply provided by the central banks largely explain the valuation of the equity markets.
The state of the respective economies leads us to believe that interest rates, in general, will be quicker to rise in the US than on the Old Continent.
We favor Floating Rate Note type bonds rather than TIPS (Treasury Inflation Protected Securities).
We favor a short duration and are therefore more willing to take credit risk than duration risk.
If, or when, the yield curve steepens, then banking sector bonds will be more attractive.
The short USD or EUR corporate bond debt of emerging market companies offers interesting opportunities. In this respect Latin America offers some nice trading opportunities.


Overall, the companies’ results are expected to be up in 2021 compared to 2020. In any case, this will not be uniform; many sectors or sub-sectors are expected to continue to suffer in 2021.


We remain cautiously optimistic because, although the economies seem ready for a rebound, it seems to us that there is exuberance in some stocks, particularly in the technology world.

Similarly, health risks are far from being resolved and the road to collective immunity remains strewn with pitfalls.

In the longer term, the global risk linked to debt is constantly increasing.


Simply buying the market will not be enough to have a positive performance. Selectivity, responsiveness and short-term horizon are the reflexes we recommend.