After the Eurozone, it's time to look at the US market where we have investments via bond instruments. Has mentioned in the launching of our first contract as advisors, the SICAV - Optimize Invest Selection is a balanced fund portfolio oriented for long-term savings composed of equity funds and bond funds.
The Fund is exposed to shares from the Eurozone countries; Switzerland; Sweden; Russia; United Kingdom; Japan and Canada.
It bears to European High Yield, US Dollar, American High Yield, Norwegian Krone, Swedish Krona and Japanese Yen in the bond component.
Evolution perspectives for the US economy
According to the International Monetary Fund (IMF), despite worst-case scenarios, the US economy is expected to contract only 3.4% by 2020. However, in the immediate future, the rate of growth will be dictated as:
1. Development in outbreaks of Covid-19, which unfortunately continue to carry very high numbers of infections and deaths.
2. The efficacy of vaccines, including their immunity, and thereby the normalization of economic activity, which may take months to achieve.
3. New fiscal stimuli, the Biden administration plan was approved, but the value fell short of the desired by the president elected. Meanwhile, the administration wants to speed up measures to mitigate the impact of unemployment.
The Federal Reserve (Fed) will continue to support the economy and the markets, keeping interest rates close to 0% until the labour market returns to full employment. Inflation does not exceed the 2% target. It will continue to buy at least $120 billion of bonds per month to provide abundant and cheap financing to the public sector, households and businesses.
Fed foresees a sustainable recovery of economic activity in the second half of 2021. According to Jerome Powell, a full economic recovery is unlikely if people do not have the confidence to resume a wide range of activities safely.
We will have to wait for a large spread of the vaccine to have a real recovery. In any case, for the coming years, President Biden election opens good prospects both at the international level — the Paris Agreement resumption, the returning to negotiations with Iran on the nuclear program or the return to the WHO — as internally with the maintenance of Obamacare.
All this will encourage activity in the United States, allowing better relations with its partners.
Strategic allocation
In terms of geographical area and investment advice, the US market represents 20% of the portfolio we recommend for the Invest Selection fund. By asset classes, at the moment, our preference for this zone rests on the bonds, whose return vs risk seems to be most attractive as compared to what is provided by the stock market that is correctly evaluated and for which there are attractive alternative solutions.
Moreover, and in exchange terms, our short and long-term prospects are of a moderate depreciation of the US dollar against the euro, considering the expansionary nature of the new administration's economic stimulus measures in the US and the robust recovery in the euro area and the European Central Bank's intervention.
All in all, we allocate 15% of the portfolio in US debt through investment funds or ETFs. It will provide some stability to the fund, and it rests in line with a moderate profile. At the same time, we reserve 5% for investment funds or ETFs of high Yield securities, more profitable but riskier.
When Euroconsumers Invest was born in June 2020, we presented ourselves with a clear purpose and well-defined objective: EUROCONSUMERS INVEST is a new Business to Business approach with a Business to Consumer DNA. We work with all entities and organisations that want to contribute to a more sustainable Financial market and empower all citizens.
The idea is to take, through work with companies, information and advice that would reach the largest number of consumers. Consumer organisations' experience is clear: there is a long way to help citizens' financial literacy. In this sense, we disseminate the way we work and the basis of our analyses delivered to partners.
To better understand the portfolio of funds or ETFs of shares and bonds, review our level 4 of the Money Framework series. We also made a video resuming the different steps to follow or evaluate the way that you manage the cycle of your income, savings and investments:
Embedded content: https://youtu.be/GCSRnsOTUdQ
Definitions:
Mutual fund – A mutual fund is a professionally managed financial product – investment fund - that gathers money from many investors to buy securities: bonds, share or both. The advantage of this product compared to direct investment - direct purchase of shares or bonds - is that by joining many investors, the amounts available to invest considerably increase, which reduces costs and diversifies the investment (a more significant number of securities purchased). This option is the most recommended for those who do not have much money (tens of euros are enough to invest), time to monitor the investment very regularly daily (fund managers can do this for you), and little knowledge of the financial markets.
ETFs - An exchange-traded fund is an investment fund traded on the Stock Exchange as if it were a stock. An ETF can also be called an index fund. Most ETFs track an index, such as a stock index or bond index.