The large investment banks have a specialized department in the efficient design of asset portfolios. The brightest minds in the sector meet regularly to decide what they recommend to their clients: increase the weight of the US Stock Exchange, reduce the weighting of bonds of emerging countries, take positions in debt issued by companies with low credit rating, buy gold … In an ideal context, an investor who does not have geographical restrictions or by type of asset could always find opportunities to take profit when some stock or bond markets are going badly. This ideal context was like that, until 2018.
"The exercise that now ends will go down in history as an exceptional fact, because practically all financial assets have had a negative behavior", Explains Joan Bonet, director of market strategy at Banca March.
The first exceptionality has been that Actions and bonuses have worked badly. In equities, falls have been in the range between 5% and 20%. It has not been a year as catastrophic as 2000 or 2008. The problem is that, on this occasion, there has been no place to take refuge. In fixed income, both European and US bonds have been depreciated, as well as those issued by companies and those issued by governments.
"Normally, the years in which stock markets go bad tend to work well bonds. The money that was invested in variable income flows towards fixed income, which revalues these assets. This has been almost always. Only in a few exercises since the 30s has it been the case that bad bonuses and actions go, and 2018 has been one of them", Explains Manuel Gutiérrez-Mellado, of the sales team of BlackRock -the largest fund manager in the world- in Spain and Portugal.
- The worst year of the Ibex since 2010. In the absence of a single session to conclude the year 2018, the year will close as the worst for the Ibex 35 since 2010. Until December 28, the selective ceded 15.6%, slightly less than 17.4 % of 2010, when the crisis in Greece ended up moving to the entire periphery of the European Union. Only in the month of December the actions of the selective have lost more than 6%.
- Only eight values are saved from burning. 27 of the members of the Ibex 35 reach the end of 2018 in negative. That, not to mention Dia, which came out of the index due to its serious financial and business problems, which had plummeted its stock market value. Only eight companies seem to close the year with green numbers. These are the electricity companies: Naturgy (the former Natural Gas), Endesa, Acciona, Iberdrola, Red Eléctrica; in addition to Cellnex, Amadeus and ACS, although the latter company has practically the same value as at the beginning of 2018.
- The small ones endure better. Spanish small capitalization companies reach the end of the year with a drop lower than the large Ibex values. The Ibex Small Caps index closed Friday at 6,071 points, 7.82% less than the value it set at the beginning of the year. Although most of the 30 firms that make up this index have ended up with heavy losses (Day, -89%, OHL, -87%, PharmaMar, -55%), there are a few that end the year with increases, such as Audax (+ 195%), Solaria (+ 146%) or Amper (+ 30.5%).
The depreciation of the bonds has not been as severe as that of the Stock Exchange, but has caused millions of conservative investors have lost a part of their savings. The FTSE Eurozone Goverment Bonds index, which aggregates the evolution of the main bonds issued by eurozone countries, registered a fall of 1.5% in the year, while its equivalent in the United States lost 0.85%.
A good example of the generalized investment catastrophe is in the Spanish funds. On average they recorded losses in 2018 of 4.63%. Although the collapse was even greater during the 2008 crisis, it was mainly concentrated in the stock market funds. Those investors more conservative, with fixed income funds, did not suffer losses. Instead, in 2018 they have lost part of their savings more than 95% of Spaniards who have investment funds.
Falls in bonds and stocks
Neither has there been a differential behavior between the bonds issued by companies and by governments. All have gone badly. This type of corporate debt it has lost almost 3% of value in North America and 1.2% in Europe.
BBVA Asset Management has also analyzed the evolution based on the credit quality of the issuer of the bonds, but the conclusion remains the same: losses predominate. So, in the fixed income of companies with the highest credit rating, depreciation has been between 1.3% in the United States and 3.4% in Europe. The falls are greater in the bonds of companies with low credit quality: in the United States they have fallen by 0.8% and in Europe by 1.3%.
"Although global economic growth remains relatively strong, markets have been anticipating some of the risks that will materialize in 2019, such as an impact on international trade due to the tariff war waged by China and the United States, or the increase in instability. geopolitical, with open foci in Italy, Mexico or the United Kingdom, with the end of the negotiation of Brexit ", explains Joaquín García Huerga, director of strategy of BBVA AM.
Goodbye to shelter assets
In times of generalized declines in all types of assets, some refuge assets have historically worked well. This time it has not been like this. Gold, which has always been revalued when there have been stock market crashes, has depreciated almost 3% in the year that now ends.
As for the German bonds or the Swiss bonds, that during the periods of crisis in the European sovereign debt allowed to avoid the losses, they quote at so low rates that they have not allowed the investors to obtain a yield that beat to the inflation.
"Our recommendation when it comes to building portfolios has focused on extreme strategies, also known as Barbell strategies. They consist of keeping the bulk of the investments in very conservative assets, which fluctuate less than the market, and get to scratch some profitability with a careful selection of stocks, either from emerging countries or with a 'value' approach. But it is true that in this market context it is difficult ", says Gutiérrez-Mellado, from BlackRock.
In an aspect in which most analysts agree is that within the current delicate financial situation is better choose to invest in equities than in fixed income. "We see clearly that there are asymmetric risks. We believe that the stock market can still offer some return but that, on the other hand, fixed income is still very conditioned by monetary policies and it is difficult to revalue it ", explains the BlackRock expert.
The funds that seek returns on the margin of the evolution of the markets have not achieved their objective either
BBVA also recommends overweighting the stock markets to the bonds. "We see that the rates of profit generation are still attractive. We can see revaluations in 2019 over 15% in the United States and in Europe ", predicts García Huerga, of BBVA AM.
Not even the alternative ones
Alternative funds (in jargon known as hedge funds) are investment vehicles that seek to distance themselves from market trends. That is, revalorize when the stock market and bonds are falling. These are investment vehicles only accessible to institutional clients, since the minimum amount to invest is high, they are not very liquid and their operation is complex.
This exercise that now ends could have been a good time to show that their strategies are effective for swimming against the current, but it has not been like that. The index that measures the average profitability of hedge funds has registered a fall of 2.5%.
Neither the alternative funds that combine short and long bets on companies, nor those that try to follow macroeconomic trends, nor those that seek to invest outside the stock and bond markets, have managed to dodge the losses.
Neither have the so-called alternative assets, like the raw materials. Oil closes the year with a fall of more than 22%. The prices of all metals used for industrial uses (steel, copper, aluminum …) and precious metals (except palladium) have also fallen sharply.
Investors also seek to distance themselves from the markets by investing in real assets, like the real estate sector. But this year has not worked either. The index that records the evolution of specialized vehicles in the sale of homes, offices and shopping centers has registered a fall of almost 5% in the year.
The Northern Trust Real Allocation index, which tracks the evolution of other investments in real assets, such as infrastructure projects, gas pipeline construction or aircraft leasing, accumulates a depreciation of 12.85% in the year.
Experts are still analyzing why 2018 has been so disastrous for investment. The end of the experiment of the most expansionary monetary policies in history is aimed at, with all the big central banks buying financial assets in a massive way to sustain their economies; the trend towards lower systemic growth of the world's gross domestic product, due to the fall in productivity; it is aimed at the deflationary forces, which make it increasingly difficult for prices to rise …
The academics will be responsible for setting the story of a year that all small investors will take to forget.