June 15, 2018

Super Mario is back

Management comment

The saviour of Europe has struck once again. Mario Draghi, the eternal European, rolled out his second put-option by ensuring visibility for the markets regarding future ECB monetary policy. On the menu, he is now proposing a reduction in total monthly assets purchases from €30bn to €15bn from the end of September onwards and winding down the programme in December 2018.

A potential initial rate hike may occur during the summer of 2019 depending on macroeconomic conditions. Although the markets and more generally valuation multiples have failed to resist against Donald Trump’s tweets (e.g. European automobile stocks when US import taxes were announced) they appreciated Mario Draghi’s declarations on the other hand.

The euro fell to around 1.15 against the dollar. The half-yearly reporting season will soon begin. Economic fundamentals will be confronted with the risk aversion which has prevailed over the past few months. Although equity markets are certainly more at risk than in 2017, there are no alternative compelling solutions. The technology sectors are shifting, the services economy is transforming into a sharing-economy, while millennials around the world (notably in China) are seizing power. Sources of inspiration must be sought within these themes to deliver performance.

Let us cite the rapid changes in the retail industry for example. Alliances between digital and bricks & mortar retailers are multiplying. The French group Carrefour has announced the conclusion of an e-commerce partnership with Google (notably via its personal assistant).

Investing in the markets at the moment resembles navigating the high seas: 1/ first set a direction 2/ then stay on course without drifting 3/ confront the wind and the swell 4/ avoid cyclones and storms. In short, for those who suffer from seasickness, 2018 may perhaps not be the most agreeable of years, but it is nonetheless possible to arrive safely in port.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in June 15th, 2018.

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The saviour of Europe has struck once again. Mario Draghi, the eternal European, rolled out his second put-option by ensuring visibility for the markets regarding future ECB monetary policy. On the menu, he is now proposing a reduction in total monthly assets purchases from 30bn to 15bn from the end of September onwards and winding down the...
2018-06-15