Monthly management comment
Macro & Politics: “ Trump hit by the virus ”
The persistence of the Covid-19 pandemic continues to question a swift recovery of the economy and increases concerns about the cyclical
outlook in Q4 and in early 2021. Ironically, the virus managed to hit President Trump only a few weeks from the elections. The news brought
instant volatility but markets managed to recover as the President seems to heal quickly. Biden continues to lead the polls and probably increased its margin after a lousy television debate. Markets seem to have priced a possible change of Presidency, with Bulls looking at the potential huge government stimulus to compensate for probable increased corporate taxes. The major risk lies in a contested election with no immediate clear winner and possible lengthy legal twists. The sanitarian situation is taking its toll on several aggregates and in particular on job figures. Many sectors are announcing layoffs (Disney, Airline companies) and the various European programs to keep people employed cannot last for ever. These worries are also impacting consumers behaviour as savings are increasing at a very high pace. The general geo political ambiance is rather gloomy with stalling Brexit negotiations and tensions rising wherever Erdogan sets is feet. As always, central banks are playing their reassuring role with the ECB now buying an even higher proportion of corporate Bonds. Another positive sign is to be found in China where the economy is on course to regain its pre-crisis levels before year end. Forthcoming 3Q corporate earnings releases (Starting from mid-October) will be a good indicator of the investors mood in the upcoming months.
Markets & Investment decisions: “ A great wall of worries to climb ”
Most markets consolidated during the month of September, some breath taking was needed after spectacular performances during the summer. Technology stocks dropped the most with Nasdaq losing more than 5% and the sector seems to have lost the lead in Equity markets. Value stocks struggle to take over and European indices continue to lay behind their American counterparts. We feel that the current correction is sound as it allows to purge some of the recent excess exuberance (Nikola or Wirecard among others). Technically some indices have broken their uptrends and we foresee a side-going trading range with no major trend until the macro picture gets clearer. The fund was rather active during the month as we took some profits on strong performing stocks (Kinnevik up more than 100% since March / Leo Vegas) we sold some laggers (Lundin Energy and Ossur). We then decided to reallocate into defensive stocks (Purchase of Essity and Invesco Agriculture Fund) or continue to add to our tech/biotech bouquet (purchase of X-Vivo and Immunovia).
E-commerce and digital economy continue to expand (Our position in the CS digital health Fund is up 30% since May) and we’ll continue to seek for opportunities in these sectors. Some stocks we currently find of interest include H&M (earnings are steadily improving), Novo Nordisk
and Stora Enso (Technical breakouts).
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