The new coronavirus and the stock market plunge are a severe test for the investment advisory of all banks. Some of the advice provided will almost inevitably disappoint clients.
The coronavirus and the concern about the extent of the economic effects of the pandemic outbreak have prompted a plunge on the stock markets. The investment teams at the banks, which were able to rely on rising stock prices in their advisory for years, will now be able to show their worth – for instance by making clear that they are less prone to panic than some of their clients.
UBS, Credit Suisse and Pictet – to mention but a few – have chosen different strategies so far. Mark Haefele, the chief investment officer of UBS, has already given advice on where to invest following the drop, while his colleagues remained more cautious.
Risk of a Global Recession
Michael Strobaek at Credit Suisse wrote in a note to clients that stock markets hadn’t yet bottomed out and investors should remain cautious.
Pictet meanwhile won’t invest in equities while the risk of a global recession hasn’ been averted. The private bank reduced its global equity exposure as a consequence of that analysis.
Measures Taken Are Not Good Enough
Faced with the outbreak and the plunge in the markets, banks are expecting a helping hand from authorities. Lombard Odier, for instance, said that the support from politics was hugely important.
UBS and Credit Suisse consider measures taken so far by governments and central banks as insufficient. The monetary and fiscal reactions to the crisis are neither convincing nor strong enough, Strobaek noted.
Huge Cash Stocks Available
The banks will for sure hope for a swift recovery, whatever their advice to clients. Haefele for one has told his clients for years to give UBS a mandate to invest.
To little avail, because many wealthy clients kept to their cash stock in anticipation of a correction.
