March 03, 2017

DNCA's weekly market outlook by Igor de Maack

Management comment

Despite displaying a few presidential qualities, few specific details regarding his economic programme were offered during Donald Trump’s address to Congress, thus rekindling the bullish trend among US and European indices. The post-Trump market rally was the third-strongest upswing in the wake of a presidential election in history. Only Kennedy in 1961 and Clinton in 1997, two of the most popular US presidents despite their various personal misdemeanours, fared better. This renewed bout of fervour is also primarily attributable to the health of the economic climate and the reassuring reporting season.

The excessive valuations among tech stocks have also added to these two fundamental factors in contributing to equity market gains. The market-cap of Apple alone ($729bn) represents 70% of the capitalisation of the French CAC 40 index. The Snapchat IPO ($24bn) beat all previous records by gaining 41% on the first day of trading. One of the initial investment fund shareholders returned a performance of +2000% on its holding.

Although pessimists will undoubtedly call to mind the tech bubble, digitalisation in our economies and especially in our behaviour is now an irreversible megatrend. This term is used by all of the IT consulting managers that we have met recently, including Capgemini, Atos and Econocom. Without giving in to the excesses of the valuation bubble, the digitalisation theme can nonetheless no longer be ignored in portfolio holdings, either via internet or digital transformation players, media and telecoms operators, or even semiconductor manufacturers. Information-flow is becoming a major issue, not just for consumers, but also for companies which now perceive huge productivity gains and future profits.

Individuals are facing the risk of being unable to sift or analyse the flood of information they receive and confusing the state of being informed with the notion of understanding. Let us remember the legitimate question posed by the best-known of all the US linguists, Noam Chomsky. “How is it we have so much information, but know so little?”.

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

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Despite displaying a few presidential qualities, few specific details regarding his economic programme were offered during Donald Trump’s address to Congress, thus rekindling the bullish trend among US and European indices. The post-Trump market rally was the third-strongest upswing in the wake of a presidential election in history. Only...
2017-03-03