June 23, 2017

DNCA's weekly market outlook by Igor de Maack

Management comment

Equity markets are taking a breather ahead of the summer recess. The bullish trend has levelled off, weighed down by fears over a further sharp fall in the oil price, with the reporting season yet to get underway, as some investors are looking to lock-in partial profits on their year-to-date performances. Certain markets and themes, or certain regions have indeed posted significant returns. Long term rates have fallen, bucking the expected trend. Steeper rates over the next few months could signal the resurgence of a bullish trend in equities, particularly in Europe where macroeconomic indicators have all been revised upwards (Italy, France).

In the US, persistent questions remain unanswered for the time being, despite the recent further rate hike by the Fed. Investors are wondering what the trend will be in terms of growth, inflation and long-term rates and whether corporate earnings will increase and by how much, and also what will become of Donald Trump.

Meanwhile, China has announced the MSCI decision to include 222 Chinese large caps (A shares) in the MSCI Emerging Markets Index (weighing 0.73%) and the MSCI ACWI Index from 2018 onwards. This decision is sending a signal to encourage China to continue striving towards reforming its economic model. China has undertaken to adapt to financial capitalism, as the country already has already fully embraced industrial capitalism. As a major contributor to global growth, China could also become a future contributor and/or generator of major global crises, through the new ties it is forging. We should not neglect that China is facing three long term perils, namely debt, demographics and democracy (the 3Ds). Lastly, the former Chinese leader Deng Xiaoping perhaps made the right call by affirming that “if China opens its doors, flies will certainly enter”.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in June 23rd, 2017.

This promotional document is a simplified presentation and does not constitute a subscription offer or an investment recommendation. No part of this document may be reproduced, published or distributed without prior approval from the investment management company.

DNCA Investments is a trademark held by DNCA Finance

Equity markets are taking a breather ahead of the summer recess. The bullish trend has levelled off, weighed down by fears over a further sharp fall in the oil price, with the reporting season yet to get underway, as some investors are looking to lock-in partial profits on their year-to-date performances. Certain markets and themes, or certain...
2017-06-23