Monthly management comment
Macro & Politics: “Korean Rhapsody”
President Trump has promised “fire and fury” in response to North Korea’s increased missile and nuclear agitation. The recent escalade between the US Goliath versus the Korean dwarf has taken its toll on recent market optimism and nibbled performance away from most stock indexes. Gold and high-quality bonds are back in business. Who knows what the outcome of this belligerent rhetoric will be but the American Government have paint-ed themselves in a corner as they will have to achieve some kind of a tangi-ble change in order to avoid a costly further loss of credibility.
A part from this topic, and some other political clouds (Venezuela’s pathet-ical showdown and May’s clumsy Brexit negotiations), the overall macro picture is surprisingly rosy: very strong employment figures in the US (unemployment at 4.3% its lowest since 2001), no inflation (wage growth still lags) and robust GDP growth in Europe (2% y.o.y). Mrs. Yellen and M. Draghi have managed so far to keep the current monetary status quo but a hawkish turn of the screw is surely around the corner or “relatively soon” as mentioned by the FOMC on June 26th.
Markets: “Swinging currencies”
2nd earnings season provided further fuel to bullish investors with 10% profit growth for more than 50% of US stocks. Nevertheless, valuations are getting dear and this current business cycle will not last forever. We recom-mend a cautious stance with some cash allocation and some stop losses.
To the exception of the US, bond and stock indexes were mostly flat during the course of July. The Dow Jones and the S&P (+ 2% in July) on the other hand reached repeated new highs on the back of an unusual long streak of positive cessions and record low volatility. Nevertheless, the strong perfor-mance of the US market was overshadowed by the quite dramatic currency fluctuations with the USD continuing fall (down more than 10% in the last 6 months), an apathetic GBP, and last but not least a wobbling CHF. Currency diversification and hedging remains essential for long term performances. Aulien was down 0.8% in July and is up 2.2% YTD.
Investment Themes & Favorite stocks: “Back to Novo ?”
The fund shown increased activity and rotation. We had to cut some losses due to the profit warning from Net Insight by reducing substantially our exposure, we also sold Betsson and Net Entertainment in order to take positions in Ali Baba, CAF:US (Chinese ETF), CRB:FP commodity ETF and some exposure to financials (Sampo and ETF). We continue to hold a quite strong portion of cash that we intend to use on market weakness.
Some stocks we currently find of interest are Novo Nordisk (good results and anti-obesity treatment on its way), Swiss Life (cash cow) and Assa Abloy (leading security and lock provider).