The Brenmarkt as a taboo subject
Active portfolio management
Liquidity creates security
An impending bear market unsettles investors, because the leading US index S&P 500, which reflects the broad US stock market, was temporarily in bear mode on May 20, but was able to break through the dramatic threshold again towards the end of trading and has been so since then make up ground again.
A bear market is defined as when the leading US index falls at least 20 percent from its most recent high. Before its current modest recovery, the S&P 500 was already down around -18 percent. To distinguish a short-term market correction from a long-lasting downturn, this seemingly arbitrary 20 percent limit has been defined as “the dividing line between painful but short-lived corrections [] and years of recovery in stock markets” can be read in UBS’s “Ben Market Guide: How to Manage Risks and Seize Opportunities in a Market Downturn”.
UBS: Investors can strategically prepare for Brenmarkt
UBS wants to break the taboo on talking about emerging markets and recessions because they are part of the investment experience and don’t increase the likelihood of them happening. Rather, the intention is to allay investors’ fears of a bear market by giving them a guide on how to protect themselves with the right positioning.
Strategic preparation could even represent an opportunity to increase long-term returns if the goals are clearly defined and the portfolio is hedged and diversified. Liquidity in the form of cash, savings accounts and high-quality bonds as well as the careful handling of debts and obligations are the be-all and end-all in active portfolio management. A certain amount of liquidity is necessary for staying power, in order to take advantage of opportunities to invest and losses to be able to accept. These losses could possibly also be used for tax purposes.
UBS offers an interactive calculator on its website that investors can use to stress test their portfolio and spending plan. The investment risk and the individual situation should be evaluated in a first step, taking into account liquidity, longevity and legacy, i.e. with a focus on the more distant future.
Editorial office finanzen.net
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