August 04, 2017

The US banking sector ended at its highest level for 10 years.

Management comment

American politics increasingly resemble a bad farce. The recent resignation of White House Communications Director, Anthony Scaramucci, provided a curious historical flashback to the Comedia Dell'Arte character Scaramouche, who was an unreliable and boastful character played by Italian actor Tiberio Fiorillo in the 17th century and referred to in a number of works by the renowned French writer Molière. After Michael Flynn and Rience Priebus, this third resignation leaves the impression that the new US administration is playing out some of the worst episodes of the famous 1980s TV show "Dallas" and its ruthless environment. Some would be tempted to say that Trump's White House is falling apart. Despite this weakening in the US political leadership (at least on the surface) and the threats caused by the emergence of numerous "democratures" (a neologism of democracy and dictatorship), the global economy is still not weakening even if the IMF has notched down its forecasts for US growth. Results from the world's largest market capitalisation (Apple) were welcomed by investors and propelled the Dow Jones to a record level. The US banking sector ended at its highest level for 10 years.

Acquired growth in the eurozone has gained momentum (Q2 GDP up 0.6%) and strangely rates in the region are still excessively low. The euro is benefiting from still robust flows and is continuing to strengthen against the dollar, which is logical since for foreign investors (especially US ones), its appreciation is beneficial for their asset valuations. It is therefore in their interest to follow the macro-economic and monetary trend by continuing to purchase European assets.

Sources of volatility in almost one third of global GDP (US and China combined) cannot be neglected at least from a tactical stance. Indeed, the European equities markets will find it hard to fully absorb all of the bad news coming from these two regions. However, over time, the collective mind-set is gradually taking on board the fact that Europe (without the UK, whose lack of preparation for Brexit is increasingly obvious) is perhaps the last refuge for worried investors. 

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in August 3rd, 2017.

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American politics increasingly resemble a bad farce. The recent resignation of White House Communications Director, Anthony Scaramucci, provided a curious historical flashback to the Comedia Dell'Arte character Scaramouche, who was an unreliable and boastful character played by Italian actor Tiberio Fiorillo in the 17th century and referred to...
2017-08-04