April 20, 2018

One swallow does not make a summer but…

Management comment

Although one swallow does not make a summer, the return of this migratory bird from its winter in Africa at the beginning of April has delighted investors. Equity indices have rallied and are now more accurately representing the bullish macroeconomic trend.  

After weathering fears of a potential slowdown in global macroeconomic growth, investors are now focusing more closely on microeconomics. The early reporting season has already revealed that deflationary pressures continue to weigh on the consumer packaged goods sector, notably Unilever and Procter & Gamble.

Disappointing earnings from Taiwan Semiconductor Manufacturing (TSMC) drove some US tech stocks lower (Apple, Nvidia, Micron) along with certain segments of the Asian equity market. Meanwhile, China has continued to contribute heavily to organic sales growth within the major multinationals such as Pernod and Schneider.

China is also gradually changing its attitude vis-à-vis opening up its domestic market, having announced less-restrictive capital ownership conditions for non-domestic automobile manufacturers, which automatically triggered panic among local automotive securities. This was an initial victory for Donald Trump whose negotiation techniques appear to have deeply unsettled the Chinese communist Confucian regime.

Long-term rates steepened at the end of the week, boosting banks and other value stocks. In a more complex year than 2017 with less clarity, we must now hope that investors demonstrate the same level of stamina as swallows, which can fly 10,000 km during their migration with just of few grams of body-fat as fuel.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in April 20th, 2018.

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Although one swallow does not make a summer, the return of this migratory bird from its winter in Africa at the beginning of April has delighted investors. Equity indices have rallied and are now more accurately representing the bullish macroeconomic trend.   After weathering fears of a potential slowdown in global macroeconomic growth,...
2018-04-20