Feb 18, 2019
Weekly Investment Focus

The fourth-quarter earnings season is slowly tapering off, and performing better than expected. Two-thirds of the S&P500 companies have reported, and about 71% of them have topped expectations. The average earnings growth rate
year-on-year for the fourth quarter is 14% (see chart 2), beating expectations of 11%, which was revised downward from 12% in early December. This picture is encouraging and justifies the significant rebound in stock markets over the past
month and a half.

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Feb 18, 2019
Weekly Investment Focus

The majority of investors expected the volume of money in the global financial system to decline this year. This anticipation of a tightening of monetary policies by the world’s major central banks has been modified. The high point of this reversal of perception came from the recent speech of the American Federal Reserve (see previous Weekly Investment Focus). After selling part of the government bonds it held in its balance sheet at a sustained pace, the Fed now wants to reduce outstanding liquidity much less quickly. Similarly, the European Central Bank, which has stopped buying bonds, is considering which tool it will use to support its convalescent banking system. As for the Bank of Japan,
the economic situation in the archipelago is so fragile, it has not even had time to consider tightening its monetary policy. It will continue to contribute to the inflow of new money into the financial system through the purchase of government
bonds.

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Feb 18, 2019
INVESTMENT OPPORTUNITIES

Future on Dividends ▪ European companies try to safeguard the payment of their dividends ▪ Typically, dividend futures trade at a discount of their estimated fair value ▪ This implies that there is an opportunity to capture a premium ▪ The timing of the entry point remains predominant  AFG-Future-Dividends-en[1]

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Feb 18, 2019
Weekly Investment Focus

Last week’s meeting of the U.S. Federal Reserve (Fed) was of an exceptional nature. The central bank had to give a clear vision of its economic outlook for the United States and, ultimately, its monetary policy in 2019. Investors will have been satisfied as the institution has clearly announced that it will not raise its key rates this year. As we expected, the cycle of rate increases that began in December 2015 will therefore have ended three years later. The key rates will have been raised nine times, from 0.25% to 2.50% over the period (see chart 2). Jerome Powell justified his decision by explaining that the economic environment is slowing down, and that inflation remains modest (see chart 3). Proof
among many others, the Fed’s real rates have never been so high since the subprime crisis 10 years ago.

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Jan 29, 2019
Weekly Investment Focus

Since January 1st, economic and financial news has been getting worse and worse, while stock market indices have rebounded higher and higher. They are still a long way from their previous summits, but the recent rebound is not negligible (see chart 2). Should we conclude that the bad news was all in the stock price indices on December 31st last year or, on the contrary, that this bear market rally is a classic bull trap? Our analyses lead us directly to the latter conclusion.

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Jan 23, 2019
Weekly Investment Focus

The effect of inflation can be destructive on performance. Imagine a bond portfolio with an annual yield of 4% and an inflation rate of 2.5%. The annual improvement in the investor’s purchasing power, i. e. the real return on this portfolio, also known as the yield minus the inflation rate, would be 1.5%. Worse still, if the investment offered a yield below the inflation rate of 2.5%, the most basic objective, namely maintaining the quality of life, would not even be achieved.

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Jan 16, 2019
Values & Opportunities 2019

  Values & Opportunities 2019

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Jan 14, 2019
Weekly Investment Focus

In the United States, shutdown is beginning to have a negative impact. At first, when the U.S. federal administration closes, tourists seem to be the only ones affected, with the closure of museums and national parks. Due to security reasons, the army is not affected by this dysfunction. Social security and public health continue to operate because they have already been funded for the full year. Finally, schools remain open because their funding is not federal.

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Jan 07, 2019

Markets closed 2018 in the worst possible way. Global stock markets turned a deep red, as did corporate bonds, convertibles, hedge funds, commodities and most currencies except the Japanese yen and the US dollar. There were not many investments to take refuge in: cash, government bonds and recently gold. While the economic slowdown is not a surprise to readers who regularly take a look at our analyses, investors are now giving it their attention.

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Dec 18, 2018
Weekly Investment Focus

The year 2018 might have started off with a roar, just like 2017, but the positive performances will quickly be erased afterwards (see chart 2). As the end of the year approaches and stock market indices test new lows (see chart 3), investors are trying to limit losses. There are a few ways to protect portfolios from the ongoing unrest. The bond market still offers some diversification, but the decline in bond yields and the associated positive returns are much more moderate than usual. The central banks’ limited room for manoeuvre to lower their key rates and the excessively high level of public debt are major factors.

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