March 10, 2017

DNCA's weekly market outlook by Igor de Maack

Management comment

Questions regarding the health of the global developed economies are now taking over from political conjecture in terms of headline news. In the US, another less-closely scrutinised statistic which is worth highlighting, alongside the traditional employment and consumer figures, is the rail freight haulage volumes indicator. Over the past three weeks, rail freight volumes in the US have surged, increasing by 8.1% in week 7, +1.8% in week 8 and +3.3% in week 9. The sectors recording the heaviest volumes have been construction, capital goods, coal and agricultural products. The Fed should therefore have no valid reason for delaying the first of several rate hikes this year. Even the ECB has begun guiding the market towards a less accommodating stance, in anticipation of higher inflation over the next two years. Reforms are still required however, in order to rekindle a sense of hope among the lost generations weighed down by a heavy debt burden, amid the digitalisation and globalisation of the economy.

For example, France has recently succeeded in matching Finland as European joint-champion in terms of public spending, which has reached a staggering 57% of GDP. Meanwhile, in Italy, the birth rate hit an all-time low in 2016, falling to 474,000 births, recording some 12,000 less than in 2015. This is the lowest number on record since the unification of the country in 1861. Needless to say, there are still issues to be resolved in the eurozone.

The forthcoming elections should therefore provide some draft solutions against this type of drift, which can only lead towards a financial dead-end. However, investors are timidly returning to European equities. After a previous week of net outflow, the tide turned positive once again this week (USD 1bn).

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in March 10th, 2017.

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Questions regarding the health of the global developed economies are now taking over from political conjecture in terms of headline news. In the US, another less-closely scrutinised statistic which is worth highlighting, alongside the traditional employment and consumer figures, is the rail freight haulage volumes indicator. Over the past three...
2017-03-10