Investment Committee – September 2021


Summary of key topics and trade ideas discussed in our latest investment committee for September 2021:

The wider picture

  • With stock markets at all-time-highs, and interest rates orbiting all-time-lows, we take again one step back to look at the wider picture –  and make sure we have a clear view of what’s driving prices.
  • Evidently, there is a global positive carry trade on. Government control on the economy is becoming nearly absolute. Particularly in Europe, the ECB almost literally sets the price of money and through its balance sheet controls over half of the Eurozone money supply. The central bank determines what commercial banks can hold as capital; it steers capital to explicitly fund government borrowing; and through reducing the regulatory risk-weighting it drives an increasing proportion of funds into ‘green’ assets, which – given they are uneconomic – will require increasingly negative rates and further government control down the road.
  • Through their artificial support of real estate prices and the stock exchange, many G7 governments raise the age at which young people can afford a house, pulling higher the average marriage age and the time to have children. While aging unable to afford a family, young people spend their money on entertainment instead, creating new markets and industries, such as social media and gaming, which have become a channel through which much of working capital is being sub-optimally allocated. Governments and central banks are creating imbalances that, for now, work as a cushion on asset prices, making sure all necessary mechanisms are there to provide support during any substantial move lower. Until the system clears, which we believe we are still a very long way from, the economic and social distortions, and the imbalances and the cost supporting them, are going to become much more extreme. Real yields will become increasingly negative, capital will be destroyed as it gets employed in non-optimal methods, and volatility will remain subdued with only periodical spikes that should be exploited to short.

Towards the end of the year

  • Throughout August, concerns about the pace of growth for the global economy dominated headlines. However, equities rallied and the major indices in the U.S. and Japan continued to climb, marking multiple all-time-highs along the way. Cyclical and value-oriented stocks under-performed, while, technology (growth) stocks out-performed, leading the NASDAQ-100 to new historical records.
  • Going forward towards the end of the year we believe that inflation expectations and tapering talk by Fed will play a crucial role to the markets The Fed continues to downplay the permanently elevated inflation scenario, insisting that inflationary pressures are due to supply bottlenecks. That is, shortages derived from supply chain issues that create constraints on how quickly the supply can adjust to the rapid and large shifts in demand (as the reopening continues).
  • We believe that market participants should be prepared for a nervous month(s) ahead as the combination of very expensive valuations, possible inflationary pressures from the excessive money printing and supply bottlenecks, and eventually changes to Feds’ narrative could create the ‘perfect storm’ for a correction.
  • We are keen to propose further investments in inflationary assets such as real-estate or commodities, but suggest doing so only in any upcoming deflationary dip, which we believe may in the cards for the coming few weeks/months.
  • Particularly for gold, we believe the metal did not follow other commodities’ extension of rally and, in combination with the US deficit figures (that often appear to be a leading indicator for gold) we can see how the price of gold can reach $2,500 in the following couple of years. That said, we consider it more probable prices to bounce from lower-than-current levels.
  • We remain bearish on fixed income (both corporate and government bonds) in this current low yield environment. The most difficult task these days is to identify cash and bonds replacement investments as these assets no longer offer return to investors.
  • For investors who were in for the long-term and apparently are enjoying extreme capital appreciation, we recommend adding trailing stop orders, in order to make sure to unwind their positions with some guaranteed positive performance in case of a market correction.

Ideas and Offering

Unicorn Systematic Strategies

In systematic investments we manage your portfolio based on a set of several well-known trading strategies that offer a sound academic and scientific background. Throughout the years we have implemented and applied these strategies ourselves.

The benefits of systematic strategies are well-known as they eliminate the behavioural bias, reduce costs and increase the probability of profit in a longer investment horizon .

Global Navigator

The flagship of our product offerings is the Incometric Athos Global Navigator Fund. The Fund is a Luxembourg-based UCITS that aims to perform absolute returns in every environment.

Incometric Athos Global Navigator focuses on capital preservation and attempts to minimize correlation to stock and bond prices. Its strategy holds a core portfolio of fixed-income securities plus some high-conviction stocks for the long-term, topped-up with an overlay strategy of financial derivatives to weather the downturns.

Real Estate Funds

Real estate is a sector we believe investors should gain exposure to as one of the first sectors to benefit in an inflationary environment. A more sophisticated way to gain exposure to real estate rather than owning property is through professional investments in real estate through financial instruments. Specifically, via world-class UCITS ETFs approved by our investment committee that invest in Real Estate Investment Trust (REIT) companies.

Model portfolio allocations

Indicative allocation (Core)

Asset ClassLowMediumHigh
Alternative Investments1.710.011.7

Tactical (1m horizon)

Asset ClassLowMediumHigh
Alternative Investments8.316.718.3