April 27, 2018

A good spring for investors

Management comment

The markets are currently weathering the first-quarter reporting season without any real difficulties. European companies have nonetheless been hit by a strong currency impact, which has wiped-out more than 5% sales growth in many cases, particularly as Q1 2018 is the quarter with the least favourable comparison base.

 Future dollar strength should provide some relief for European companies however. Given the current spread in interest rates, of almost 250 basis points between 10-year Treasury and Bund yields, the dollar is likely to stage a technical rally in the short term. A comparison of US and European indices reveals that 2018 and 2019 earnings for the S&P 500 are being revised upward slightly, whereas DJ Stoxx 600 forecast have so far remained unchanged.

Several factors account for the current cautious analyst consensus in Europe, including the currency impact and the temporary slowdown in European momentum, whereas economic growth stimulus measures appear to have been successful in the US. Year-on-year real estate prices in the 20 largest US cities increased by 6.8% in February.

Lastly, the prospect of appeasement between the two Koreas, even if one if the two is more agitated, has contributed to restoring risk appetite. The period when nuclear missiles were flying over Japan now seems a long time ago. The onset of spring appears to be auspicious for investors for the time being.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in April 27th, 2018.

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

The markets are currently weathering the first-quarter reporting season without any real difficulties. European companies have nonetheless been hit by a strong currency impact, which has wiped-out more than 5% sales growth in many cases, particularly as Q1 2018 is the quarter with the least favourable comparison base.  Future dollar...
2018-04-27