December 22, 2016

DNCA's weekly market outlook by Igor de Maack

Management comment

Global trading volumes have started to thin out. Investors are busy thinking about their Christmas presents after these past few weeks of equity market rally. Unfortunately, unrelenting news of terrorist attacks in Europe and further afield have reminded us of the fragility and the richness of our democracies. 2016 will have been a year rife with dangers and risks. Despite the global economy remaining broadly on track, stock markets were gripped by numerous phases of panic throughout the year. One more week remains until we can draw up the final analysis and look ahead to 2017. For the time being, sector positioning continues to focus on stocks which have been neglected by investors since the beginning of the 2008 financial crisis.

As a result, in the US, investors prefer bank trades over the so-called fang trades, based on the acronym of the names of the heaviest tech growth stocks, Facebook, Apple, Netflix and Google. Likewise in Europe, banking stocks have outperformed tech stocks over the past few months. Bank vs fang was the bet to set up during the latter part of the year in order to ensure the Yin and Yang of portfolio allocation, hoping nonetheless that the scenario does not end up as a massive big bang, if the recapitalisation of the Italian banking industry ultimately fails.

Meanwhile however, investors can thank the amazing Donald, who has now been duly elected by the Electoral College, and who has proven more generous than Uncle Scrooge McDuck by triggering a powerful rally among value stocks at the end of the year in Europe and driving US equities to all-time highs. Although much more impetus is required to propel equity markets higher still next year, let us nonetheless take a slight pause during the year-end festivities, which will enable us to focus on the good things in life, which will necessarily be short-lived, and forget (somewhat) our persistent state of anguish.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in December 22nd, 2016.

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Global trading volumes have started to thin out. Investors are busy thinking about their Christmas presents after these past few weeks of equity market rally. Unfortunately, unrelenting news of terrorist attacks in Europe and further afield have reminded us of the fragility and the richness of our democracies. 2016 will have been a year rife...
2016-12-22