Investment Policy - map fund management, luxembourg

Transcription

1875 MAP
MARKET ALLOCATION PROCESS
Investment Strategy
October 2016
TABLE OF CONTENTS
Investment Policy
Economic Environment
3
Financial Environment
7
Investment Strategy
1875 FINANCE ·40, rue du 31 Décembre · Case Postale 6208 · CH-1211 Genève 6 · Tél. +41 (0)22 595 18 75 · Fax + 41 (0)22 595 18 00 · www.1875.ch
1875 FINANCE (Luxembourg) · Bd. Prince Henri 41 · L-1724 Luxembourg · Tél. +(352) 27 99 1875 · Fax + (352) 27 99 1875-75 · www.1875.lu
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2
INVESTMENT POLICY
Economic Environment:
During the month of September, our economic indicators
showed mixed trends. While in Europe they improved, they
appeared to point to a certain deceleration in activity in the United
States. Within the emerging zone, the economic recovery is clear
in Latin America, versus a slowdown in Asia.
As a result of the rising commodity prices, the deflationary
pressures have been temporarily alleviated and enable a
moderate recovery in nominal growth for the second half of
the year.
Without implementing the structural reforms required to
strengthen the efficiency of the markets and in the absence of
further expansion in budgetary and fiscal policies, an
acceleration of the economic cycle appears unlikely. The
world economic environment remains therefore affected by the
reduction in expected growth and the current production
overcapacity.
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INVESTMENT POLICY
•
USA: After a significant drop in September, the leading US indicators
have recovered in early October and enable the anticipation of a
less important reduction in US growth. It remains supported by
strong consumer spending. However, its performance remains
weakened by low productive investment and weak exports.
Employment continues to rise at a moderate pace. Inflation remains
below 2% due to the transitional effects of decline in energy prices
and imported goods. Higher production costs, caused by the
increase in salaries, will however generate an increase in price
indices during the next 6 months.
•
Euro Zone: Given the performance of our economic indices,
economic expansion in the Euro Zone continues and might
become stronger than expected. With regard to the decrease in
deflationary expectations flagged by our model, price indices
appear to have reached a floor level. Their progress will, however,
be limited by the ongoing surplus of productive resources.
Source: 1875 MAP
4
INVESTMENT POLICY
•
United Kingdom: After a significant drop following the BREXIT
result, our indicators on the British economy have not
declined further. Contrary to investor predictions, the statistics
on real activity have actually improved. The lower capacity of
companies to invest has been counteracted by the depreciation
of the British pound and the monetary easing of the Bank of
England. As a result of the sharp fall in the exchange rate,
inflation expectations have adjusted in favour of a recovery in
price indices for the second half of the year.
•
Switzerland: The economic data released during the month of
September improved and enables a recovery of Swiss growth
over the next 6 months. Our provisional inflation indicators
continue to point to a gradual decrease of deflationary pressures
in Switzerland.
Source: 1875 MAP
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INVESTMENT POLICY
•
Japan: In line with our expectations, the Japanese economy has
continued to slow. As result of a more stable yen and the continuation of
moderate world growth, the deterioration of the Japanese economy will
be mitigated in the coming months. Inflation will continue to decline
during the quarter due to the drop in import price indices.
•
Emerging countries: Following the recovery of commodity prices and
support measures, the contraction of the economic cycle in the
emerging area will decrease significantly. Due to the ongoing excess in
production capacity and lack of sufficient structural reforms, the recovery of
growth in developing nations will remain uncertain and especially modest
by historic standards.
•
China: Having benefited from the increased government investments and
the monetary easing implemented by the People's Bank of China, the
expansion of the Chinese economy is set to lose momentum given the
lack of new fiscal and monetary stimuli. The risk of seeing a significant
decline in growth is mitigated by the ongoing low interest rates and
weakening of the Renminbi.
Source: 1875 MAP
6
INVESTMENT POLICY
Financial Environment:
•
Last month, the financial environment showed no significant
change, remaining with slow expansion. Its evolution has
however been heterogeneous: less accommodating in the United
States, stable in the emerging area and more expansive in Europe.
•
Following their recent declarations, monetary authorities have
reaffirmed the limits of their policy. They have become aware,
mainly in Japan, of the adverse side effects that could occur in the
monetary and banking system as a result of establishing negative
interest rates. They have furthermore insisted on the fact that the
growth recovery cannot be supported exclusively by their actions,
also requiring the support of government policies both in terms of
structural and budgetary adjustments.
•
In light of the slight reduction in the monetary incentives
initiated by the central banks, the expansion of financial
conditions will henceforth depend more heavily on the
behavior of risk premiums.
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INVESTMENT POLICY
•
Following the September meeting, the US Federal Reserve has not
changed direction of its monetary policy, expecting the
improvement of the economy. It has however clearly indicated that
the probability of a 25bp hike for the federal funds rate between
0.50% and 0.75% has increased, therefore confirming our
scenario of an upcoming hike in December.
•
The hesitations and conflicting opinions within the FOMC derive in
turn from the delayed implementation by the US central bank of the
normalization of its policy, as well as the significant uncertainties that
the US economy must face.
•
In terms of our model, the financing conditions in the United
States have tightened and are now in a state of neutrality.
Source: 1875 MAP
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INVESTMENT POLICY
•
The ECB is continuing its asset purchasing programme by
expanding its scope to bonds issued by companies and is
pursuing its refinancing operations. While inflation still falls short of
the objectives set and there are increased expectations of additional
easing, the European authorities will not change their policy during the
second half of the year, aware that their action would make them face
their own limits. Notwithstanding the absence of new interventions by
the European Central Bank, the monetary environment in the Euro
Zone remains expansive.
•
Following its monetary policy committee, the Bank of Japan decided
to implement a QQE (Quantitative and Qualitative Easing), aimed at
setting a target interest rate for a certain number of maturities and
therefore controlling the yield curve. The rate charged on short-term
deposited assets was maintained at -0.10% and the target yield of 10year government debt was set at 0%. The decisions made by the
Japanese monetary authorities did not have a major influence on
financing terms, which remained restrictive.
Source: 1875 MAP
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INVESTMENT POLICY
•
While remaining at historically restrictive levels, given the small expansion of long-term monetary
aggregates and the lowering demand for credit, financial conditions in emerging economies have
continued easing thanks to the reduced cost of capital.
•
Considering the strong growth in credit demand, the People's Bank of China will not be modifying its
interest rate policy in the short term, but will instead supporte a controlled depreciation of the renminbi.
Source: 1875 MAP
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INVESTMENT POLICY
Investment Strategy: Asset Classes
•
Reduce exposure on short-term investments.
•
Additionally decrease the weighting on bonds to make it
moderately underweighted.
•
Selectively and gradually increase the weighting on
equities in order to equal-weight them from now on: The
stock markets, and the European ones in particular, will benefit
from the rise in their multiples and the improvement in
corporate profits.
•
Keep the underweighting of indirect international real
estate as a result of its expensive valuation and the worsening
of financial conditions in the United States.
•
Source: 1875 MAP Wealth Management CHF
On lower prices, increase the overexposure to gold in light
of the excessively low real interest rates and an attractive
valuation.
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INVESTMENT POLICY
Investment Strategy: Bonds
•
Increase the underweighting of bonds while maintaining
overall durations slightly lower than the strategic
allocations. Under the influence of the recovery of nominal
growth, bond yields will gradually increase. Their rise will,
however, be mitigated by the ongoing excess production
resources.
•
Keep an overweight position on borrowings in AUD and – to a
lesser extent – in CAD. Reduce exposure to investments in
NOK in order to underexpose them. Continue to underweight
allocations in USD, EUR, CHF and GBP. Decrease the
underweight on investments in JPY.
•
In terms of debtor categories, overweight corporate bonds by
underweighting US private bonds more moderately and
overweighting their European counterparts even more.
Source: 1875 MAP
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INVESTMENT POLICY
Investment Strategy: Equities
•
After having consolidated during the month of September,
equities now have a balanced short term valuation.
•
Although still sensitive to the evolution of the risk premiums,
stock markets will selectively benefit from the moderate
expansion of financing conditions and the recovery of
profit outlook.
•
The exposure on equities must therefore be gradually
increased to a neutral weighting.
•
In terms of geographical allocation, the correlation between
the major stock exchanges will gradually diminish
alongside the reduction of risk premiums, whose evolution
nevertheless remains uncertain due to the difficulties faced by
the European banking system.
Source: 1875 MAP
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INVESTMENT POLICY
Investment Strategy: Equities
•
Markets benefiting from a more expansive monetary environment
and improved profits of their companies will become privileged:
 This will entail giving preference to British securities and
– to a lesser extent – Euro Zone securities, where the
former are highly over-weighted and the latter,
moderately overexposed.
 As a result of the gradual recovery in company results, the
Swiss and emerging markets have a close to neutral
weighting, with the latter benefiting from an increase in
their weighting compared to last month.
Source: 1875 MAP
 The deterioration in the financial conditions and profit outlook
in the United States, Canada, Australia and, particularly,
in Japan, requires their underweighting to be
maintained, moderated for the first countries and significant
for the last.
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INVESTMENT POLICY
Investment Strategy: Currencies
•
EUR/USD: Keep a slightly overweight position on the EUR as it
still has a favourable risk premium.
•
EUR/CHF: Reduce exposure once again to the CHF
following the increase in the interest rate differential and the
excessive valuation of the franc.
•
GBP/EUR: Keep the underweight of the GBP against the EUR
given the ongoing high external premium on the British
currency.
•
USD/JPY: Keep an underexposure to the USD against the JPY
due to the high USD risk premiums.
•
AUD/USD: Underweight the AUD strongly due to the
increase in the risk premium of the Australian currency.
•
USD/CAD: Maintain a slightly overweight position of USD due
to an economic environment that remains detrimental to the
Canadian dollar.
Source: 1875 MAP
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Important Legal Information
This publication is intended for information purposes only, and should not be construed as an offer, recommendation or solicitation for sale, purchase or engagement in any other transaction.
Furthermore, by offering information, products or services via this publication, no solicitation is made to any person to use such information, products or services in jurisdictions where the provision of
such information, products or services is prohibited by law or regulation. All material is provided without express or implied warranties or representations of any kind and no liability for any direct or
indirect damages arising out of the use of this information is accepted.
All information contained in this publication has been prepared by 1875 FINANCE SA on the basis of publicly available information, internally developed data and other sources believed to be reliable.
It is for general informational purposes only and should not be construed as an individualised recommendation or personalised investment, tax or legal advice. The information is subject to change
without notice. Reasonable care has been taken to ensure that the materials are accurate and that the opinions stated are fair and reasonable. All opinions and estimates constitute our judgment as
of the date of publication and do not constitute general or specific investment advice.
Investments in the asset classes mentioned herein may not be suitable for all recipients. Past performance is no guarantee or indication for future results. The price, value of, and income from
investments in any asset class mentioned in this publication may experience upward and downward movement and investors may not get back the amount invested. International investing includes
risks related to political and economic uncertainties in foreign countries, as well as currency risk. Any investment should be made only after thoroughly reading the current prospectus and/or other
documentation/information available. Nothing contained in this document constitutes legal, tax or other advice, nor should any investment or any other decisions be made solely based on this
document.
This publication is not intended for distribution to, or use by, any person or entity in any country or jurisdiction where such distribution or use would be contrary to applicable local laws or regulations
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Investment Policy - map fund management, luxembourg

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