Macro Market Corrections & Tier 1 Assets

One silver lining to large-scale macro market corrections is that they are often the only periods where tier 1 assets become affordable. Tier 1 assets tend to have a disproportionate chance at making it through challenging periods and rewarding long term investors who properly identify these unique entry points. Take, for example, the German DAX index in the heart of the 2011 European sovereign debt crisis. Germany held a robust balance sheet relative to its peers in 2011, is the largest economy in Europe, the fourth largest in the world, and one of the most productive. The decline in the DAX nonetheless matched that of its over-leveraged neighbours – falling by over 30% within three months. The DAX appreciated >2.5x just a few years later; while most of the more challenged peer group simply reclaimed 2010 levels.