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Dresdner Bank

By Herbert Berger

Bernd Schroder

Bjorn Grob

Thomas Langer

Proposed strategy for A-based Portfolio
Customer profile: Conservative Continental European Investor
Tactical considerations

The crucial question for giving appropriate investment advise is: should one look for exceptional performance or should tight control of risk dominate investment tactics. We opt at this stage of the cycle to emphasise a more defensive structuring of the portfolio with rigorous risk control. So called high growth stocks are ? after the disastrous price depreciation between 2000 and 2002 and a great snap back 2003 ? basically still in a bear market. Valuations are again very high and the appetite by investors to invest into this segment is limited, at least at present price levels.

Our economic model looks for slower growth in North America in 2005. A peak in the profit cycle is expected in Q2. 2004.  European growth will lack dynamics also in 2005. The trend of interest rates has globally turned to the upside with a monetary tightening in the US to be expected around mid year. On the other hand productivity growth will slow with either the potential of rising inflation or pressure on corporate profit margins. Equity markets at least in the western hemisphere have already included an improving economic cycle in their valuations with little room for price appreciation left.

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