Please note: this article is more than one year old. The views of our CIO team may have changed since it was published, and the data on which it was based may have been revised.

Our experts explain why you need to be more selective about your equity investments at this stage of the economic cycle, and how they can help

We are late in the economic cycle. Historically, this has been a time of higher volatility but also attractive opportunities in equities, provided you know where to look. As the performance of different markets and sectors diverges – a trend known as ‘dispersion’ – you need to be selective in order to “Stay Invested But Hedge”. You also need to be active in the way you manage your portfolio, if you wish to seize remaining opportunities for growth while mitigating the higher risks involved.


One way to focus your equities is by considering which types of investments look likely to produce growth over the long term. This is something we do at the beginning of each year by naming ‘Tomorrow’s Themes Today’, our list of strategic long-term investment themes, which currently includes ‘Millennials’, healthcare, cybersecurity, infrastructure, smart mobility and artificial intelligence.


But what about the near, more volatile future? Our CIO team believes there is still “oxygen” in the equities markets, but where are these attractive opportunities to be found? In this, the last in our four-part series exploring how to ‘Stay Invested But Hedge’, experts from around Deutsche Bank Wealth Management offer their ideas and explain how they can help.


Use funds to focus on particular regions and sectors

Romy Cuadras, Global Head of Fund Solutions

As our CIO team recently pointed out, “US growth looks buoyant while emerging market equities will… benefit from strong underlying economic fundamentals – particularly in Asia”.  So now is the time to consider whether enough of your portfolio is allocated to equities in these two regions.


Our Fund Solutions team can help you to identify fund managers who specialize in both these regions, and in the sectors our CIO team feels offer the best opportunities for growth. We can also advise you on how to select high-quality funds that are actively managed – something that can prove especially important in the late-cycle environment, when reacting quickly to market moves can help you to seize opportunities and mitigate risks.


Thanks to our open architecture, we can offer you access to a wide variety of fund providers based purely on our detailed analysis of their performance and strategies. We make it our business to gain an intimate understanding of each fund’s holdings and risk exposures, as well as the management style of the individual manager, to provide insights about how your equity allocations can be adjusted to give you the opportunity to meet your investment objectives while taking an acceptable level of risk.


And of course we will work with our partners in Wealth Management to ensure your portfolio remains appropriately diversified, based on your overall wealth needs.


Use structured products for selective equity exposure

Nick Stone, Global Head of Capital Markets

Structured products could help you to invest more selectively in equities, with features designed to enhance yield whether prices move up or down, and to preserve your capital if the market moves against you. Our Equity and Structured Product Specialists work with multiple issuers to tailor each structured product to the specific objectives and risk appetite of the client, combining their expert views on single stocks with the macroeconomic and sectoral forecasts of our CIO team.


It is only by reacting quickly to market moves that you can take advantage of heightened levels of volatility and dislocations within and between regions, sectors and equities. So, during this late stage of the economic cycle, it is vital to ‘stay close to the markets’. We do this by ensuring that we::

  • Stay well-connected with issuers, who show us new ideas and pricings as these arise;
  • Employ professionals with investment bank experience;
  • Stay attentive to markets with pricing tools developed in-house, designed to identify opportunities and attractive changes in pricing; and
  • Actively engage traders from the widest possible variety of sources (thanks to our open architecture) to get colour on liquidity and pricing anomalies.



Keep your portfolio unconstrained and appropriately diversified

Christian Nolting, Chief Investment Officer and Global Head of Wealth Discretionary

Our Wealth Discretionary service allows clients to stay appropriately diversified across different asset classes, as the investment cycle evolves. Not only will volatility levels change as we move through the cycle, but the degree and nature of correlations both between and within asset classes will also shift. Active management is therefore an important ingredient to portfolio management that tries to create an asymmetric relationship between risk and return in an unconstrained context rather than trying simply to outperform a benchmark.



For further guidance on how to ‘Stay Invested, But Hedge’, try watching the other videos in this series:


Part 1 – How to make your portfolio more resilient

Part 2 – How to move out of cash

Part 3 – How to fix your fixed income 



Structured Products.

Structured Products are not suitable for all investors due to potential illiquidity, time to redemption, and the payoff profile of the strategy. These products may not be readily realisable investments and are not traded on any regulated market.

Please consider carefully before investing.

Credit Risk: The holder of the investments will be exposed to the credit risk of the Issuer.

Market Risk: Capital repayment depends on the performance of the Underlying, the future performance of which cannot be guaranteed.

Liquidity Risk: Although the Issuer will use reasonable efforts to quote bid and offer prices (subject to internal policy and applicable laws and regulations), the liquidity of the investments may be limited or non existing.

Exit Risk: The secondary market price of the investments will depend on many factors, including the value and volatility of the underlying index, interest rates, time remaining to maturity and the creditworthiness of the Issuer. Prior to maturity, the price may be less than the amount the holder would have received on maturity of the investment.

Income not guaranteed: The investment does not generate a guaranteed income and investors will not receive dividends, which they would otherwise receive if they invested in the Underlying directly.

Cap on return: The maximum pay-out of the Notes is pre-set at launch and limited to the pre-determined amounts. The investor may therefore receive a lower total return on redemption than they would have received if they had invested in the Underlying directly.

Capital at risk: If less than 100% capital protected, the capital is at risk and the investor may lose some or all of the entire capital invested.

For Investors in the Americas:

For informational purposes only. This is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. It is based on information from sources believed to be reliable. No representation is made that it is accurate or complete or that any returns indicated will be achieved.

Structured investments are not traditional investments, and investing in a structured investment is not equivalent to investing directly in the underlying asset. Structured investments may have limited or no liquidity, and investors should be prepared to hold their investment to maturity. The return of structured investments may be limited by a maximum gain, participation rate or other feature. Structured investments may include call features and, if a structured investment is called early, investors would not earn any further return and may not be able to reinvest in similar investments with similar terms. Structured investments include costs and fees which are generally embedded in the price of the investment.

Structured Products are offered only to investors who qualify as an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933 and is a “qualified purchaser” as defined under the Investment Company Act as amended (the “1940 Act”), and the rules promulgated thereunder. The securities will not be recommended by any United States Federal or State Securities Commission or regulatory authority. 027869 120418

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