This Market Breather Is a Good Thing: Strategist
Worries over Greece and its bond swap deal have ended a mammoth rally in risk assets, leaving investors to question whether 2012’s winning streak is all over.
Christian Gattiker, chief strategist and head of research at Swiss bank Julius Baer told CNBC that a breather is healthy for the market, however.
"It’s no surprise that after a rally of 45 days in a row that we’ll see some pausing," he said.
"We have to face the fact we’re in a liquidity-driven market and eventually this liquidity will find its way into the real economy. Looking at what the smaller German banks tapped from the [European Central Bank], we might even see a further boom in the German economy. This won’t be a walk in the park, but there are some signs of a stabilization in the European economy," he said.
As the risk selloff gains momentum, investors are flocking to Treasurys and other safe-haven assets. Gattiker believes the current dip in the market could be a good time to catch up on portfolio housekeeping.
"Some people didn’t even like to look at their portfolios in 2011. At least now it doesn’t look that catastrophic anymore," he said.
"We would suggest to go in and have a look at whether you’re happy with the quality you hold and also eliminate some of the positions. An obvious choice to make is whether you want to stick with low-quality, financial sector-related assets," he added. “Looking at some of the issues on the equity side, there we would rather stick to quality and get out of positions where we think the balance sheet isn’t really worth holding after this rally."