March 31, 2017

DNCA's weekly market outlook by Igor de Maack

Management comment

The economic situation in the eurozone is now irrefutably improving under powerful reflationary momentum. Companies confirmed this fact on publishing their 2016 annual earnings, which triggered a slight overall upgrade in forecasts in the DJ Stoxx 600 for the first time since 2011. However, European assets have not yet seen any real inflow, as investors are probably awaiting the result of the French elections before buying into European equities. The results will also determine the next stages of development in the eurozone and Europe in general.

Last Wednesday, the UK triggered its exit from Europe, while the Scottish parliament set in motion a probable fresh independence referendum. The reason that many observers tend to blame Europe for all possible ills and foreseeable problems is probably due to the fact that it has remained more of a political concept for its populations, rather than an economic reality, despite the proof evident the rise in gross domestic product since its creation. Furthermore, the monetary union is not necessarily responsible for the calamitous management of public accounts, or the impossible-to-finance promises made by candidates who have little experience of the mechanisms of liberal economies in an open and globalised world.

In the US, investors now doubt the new administration’s policy and its capacity to implement its programme. The US stock market is increasingly struggling to extend its bullish trend, pending the delivery of Donald Trump’s campaign promises. The good news however, is that US democracy has proven the existence of an efficient system of checks and balances, which means that crypto-monarchic political regimes, under which the President wields full powers, can be curbed....As consolation, we can conclude that political risks and hazards are not an exclusively European issue.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in March 31st, 2017.

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The economic situation in the eurozone is now irrefutably improving under powerful reflationary momentum. Companies confirmed this fact on publishing their 2016 annual earnings, which triggered a slight overall upgrade in forecasts in the DJ Stoxx 600 for the first time since 2011. However, European assets have not yet seen any real inflow, as...
2017-03-31