September 2016: Short-term uncertainties lifted

The SITUATION of the markets:

Global financial markets have regained some stability this summer and seem to have digested the surprise vote in favour of the Brexit.

Publication of figures in the United States that reflect an improvement in growth dynamics

  • Consumption on the rise
  • Strong job Market
  • Robust housing sector

Economic activity in the Euro zone which is improving

  • Acceleration of household consumption
  • Slight relief of external demand

The publications of the companies surprised positively after the downward revisions of the profits of the enterprises by numerous analysts.

  • In the United States, of the 93% of companies that have already published, 54% have broken the consensus on turnover and 79% for net results
  • In Europe, the figures came to 49% and 63% respectively

However, the uncertainties related to the recapitalization programme of the Italian banks whose dubious debts are estimated at more than 200 billion euros (1/3 of the total in the euro area) remain.

Our recent ACTIONS:

Increase in share shares pending future election dates including the American election and the Italian referendum in October

  • Apple’s purchase: The release of the iphone 7 and the temporary tax amnesty for the repatriation of cash from foreign-held companies, following the presidential election are buying catalysts
  • Purchase of Accor Securities following the Brexit: action unfairly sanctioned in a sector in full restructuring. In addition, the gradual rise in the capital of a Chinese actor is favorable to the value

Continued exposure to the oil sector during the summer via Devon Energy (+ 5.60% in July vs-14% for the barrel and + 13.20% in August vs + 7.50% for the barrel)

Strengthening of the positions on bond funds maturing 4-5 years in order to take advantage of still positive returns on high-yield bonds

The outlook:

American elections: Even if the two candidates do not have the favor of voters, the match seems strongly oriented in favor of Hillary Clinton. This should not create large variations in the financial markets. It should be noted, however, that the electoral programmes should be more or less favourable to certain sectors of activity:

  • Infrastructure should be the big winners
  • Health should be impacted by new laws to lower drug prices
  • Companies with cash outside the United States could benefit from ease of repatriation, which is favorable to the technological sector

Central banks:

  • Increasingly important asset buyback programs in Europe and Japan promote higher markets
  • In the United States, the FED should not raise its interest rates until December even though the probability of rising in September has risen from 0 to 40% in recent weeks including at the meeting of Governors of the American central banks in Jackson Hole
  • Central banks continue to hammer that the sustainability of the recovery can only be achieved if the governments of the struggling countries are to put in place the necessary reforms.

Aymeric DIDAY
Director of management under mandate

Finished writing at 14h on 05/09/2016