MARKET COMPASS
SEPTEMBER 2018

Edited by the Macro & Market Research Team. The team of 13 analysts based in Paris, Cologne, Trieste, Milan and Prague runs qualitative and quantitative analysis on macroeconomic and financial issues.

The team translates macro and quant views into investment ideas that feed into the investment process.

  • The strong US performance supports global growth, but political uncertainties (Trade war, Brexit, Italy) will weigh on sentiment over the next months. The increase in US policy rates will have global spillovers.
  • Some Emerging Markets’ currencies are weakening significantly given the higher US rates, but a global crisis looks unlikely, given the overall solid economic fundamentals.
  • Political uncertainty will keep core bond yields low for now. However, in the longer run, resilient growth, inflation and reduced support by central banks will support them.
  • Volatility in Developed Markets’ equity and rates appears low, given the forthcoming monetary tightening. We keep a defensive stance by holding cash and prefer equity over bonds given the looming monetary tightening.
CHINA’S Q4 GDP GROWTH SURPRISED ON THE UPSIDE, BUT RISKS TO THE OUTLOOK HAVE INCREASED

RELATED INSIGHTS

CHINA’S Q4 GDP GROWTH SURPRISED ON THE UPSIDE, BUT RISKS TO THE OUTLOOK HAVE INCREASED
This morning, China published its Q4 GDP growth alongside with December monthly activity data. Q4 growth accelerated to 6.5% yoy which lifted total 2020 GDP to 2.3%. December real activity data were more mixed. While exports came in strongly, important domestic demand components were a bit unsteady.
COVID-19 FACTS & FIGURES
US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.
EQUITIES: STAY POSITIVE WITH A VALUE-CYCLICAL TILT
Following a monster rally in stocks last autumn, multiples are well above historical averages, but equity investors can count on lingering low yields, tighter credit spreads and increasing central banks’ balance sheets which in turn maintain low the cost of equity and the discount rate of future cash flows.