Citywire Interview – Zurich WM CIO dismisses recession fears

Recent market sell-offs have been valuation-based, not an indication of macro downfalls, Mora Wealth CIO Fernando de Frutos has told Citywire Switzerland.

According to de Frutos (pictured), the recent volatility spikes are consistent with normal market behaviour.

He said: ‘These type of volatility spikes have become more frequent – we have steady markets, then a sharp correction. There may be some technical factors at play, such as high frequency trading, but markets behave like that. They are not smoothly pricing in all kind of variables and factors that affect valuations. This might also be exacerbated by a long equity bull run. Maybe it’s a behaviour that has been forgotten.

‘It’s a question of whether or not it’s a correction that’s justifiable from fundamentals. Interest rates have been increasing over the year, but also corporate earnings. However, third quarter earnings have been less exuberant, and investors are recalibrating their expectations. So I’m sure it’s more a valuation kind of sell-off than a macro sell-off, which would instead indicate that something had gone wrong on the macro side or that the probability of a recession is increasing.’

While the sell-off itself has not pushed de Frutos to change his allocations, he did note that positive real interest rates have prompted him to reduce his exposure to gold.

‘It is very difficult to have an allocation for gold when you see that you have positive real interest rates. In the US, interest rates are increasing and inflation remains well anchored, so we’re having positive real interest rates for the first time in many years. We like gold as a diversifier, but holding gold is a questionable investment at the moment, so we cut it,’ he said.


Fernando de Frutos, MWM Chief Investment Officer


* This document is for information purposes only and does not constitute, and may not be construed as, a recommendation, offer or solicitation to buy or sell any securities and/or assets mentioned herein. Nor may the information contained herein be considered as definitive, because it is subject to unforeseeable changes and amendments.

Past performance does not guarantee future performance, and none of the information is intended to suggest that any of the returns set forth herein will be obtained in the future.

The fact that BCM can provide information regarding the status, development, evaluation, etc. in relation to markets or specific assets cannot be construed as a commitment or guarantee of performance; and BCM does not assume any liability for the performance of these assets or markets.

Data on investment stocks, their yields and other characteristics are based on or derived from information from reliable sources, which are generally available to the general public, and do not represent a commitment, warranty or liability of BCM.

Leave a Reply