We should be happier to have a job than to have our savings protected… I think that it is in this spirit that monetary policy has been decided by my predecessors and I think they made quite a beneficial choice. Christine Lagarde

We should be happier to have a job than to have our savings protected… I think that it is in this spirit that monetary policy has been decided by my predecessors and I think they made quite a beneficial choice. Christine Lagarde

Monthly management comment

Macro & Politics: Trade war reloaded

President Trump managed once again to disturb a market seemingly heading towards a smooth 2019 ending. New US tariffs were announced on Latin American countries and France while China tariffs are still due on December 15th.
The US president also stressed there was no deadline to the China deal. These announcements have shaken investors sentiment, a few will probably log in profits. Fundamentally, nothing much has changed but staying on the side might seem more comfortable.

Global indicators continue to show a modest growth with no immediate sign of recession. US GDP was revised up to 2.1% from 1.9% on annu- al basis but consumer confidence is faltering and corporate profits are slowing sharply. China keeps struggling with its weakening economy (industrial profits are down 9.9% y/y its largest contraction since 2011) and does not seem to follow the European or Japanese path of ex- treme monetary policies. Europe shows an encouraging overall stabilization with a bright French consumption. Potential significant capital ex- penditure programs would help in stimulating the European zone further.

The Macro situation seems so far under control, the Fed Put is well in place and a new interest rate drop is in the cards.

Markets: no alternative to Equities?

Most major stock indexes are trading at all-time highs (S&P +25.3% YTD, Eurostoxx +23.4% YTD, OMX +22.8% YTD). Technical breakouts have been confirmed and momentum is still favourable. Some signs such as market breath and certain sector valuations should keep investors on their toes. The capitalisation of the FANG’s and other hi flying tech companies are reaching mind wobbling levels. Nevertheless, 76% of US listed companies managed to beat expectations and keep their positive momentum.

We have recently initiated a repositioning of the assets by reducing some cyclicals (sale of Boliden) and adding to defensive (Novartis, tech- nical break out) and entering aerospace tech UK company BAE systems. We have kept our Equity exposure close to its max capacity (approx. 25%).
On the Bond side we have added a 2021 Hertz Bond with an approx. yield of 3.5%, a Credit Suisse Asia Corporate Fund as well as the Arcano Low Volatility European Income Fund.

Our current favourite picks include: ABB, Elekta (good entry point after its profit warning) and some banks such as BNP or Nordea (valuations are now extremely low).
We thank everyone for the given trust and wish you all very happy holidays.

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