e-fundresearch.com: From Brexit to Trump: What are your personal lessons learned from year-to-date market developments?
Eric Biassette: First of all, when broad-based, macro developments can dominate local political events. In June, after the oil and dollar shock, energy profits stabilized and the same occurred for the global trade (in nominal terms). Both the manufacturing confidence and the inflation expectations bounced back. In such circumstances, the Brexit produced an immediate and negative response, but then the macro momentum prevailed as global monetary policies shifted into a more dovish stance.
As such a macro momentum is still in place, the outcome of the US elections hasn’t really unsettled the markets so far; on the contrary, investors believe that president-elect Trump’s program concerning higher net expenditures (and higher public debt) could eventually be reflationary.
The second point relates to politics. The anti-establishment sentiment is present also in the US, where the growth is on average higher than elsewhere in the developed world. Solutions to issues like inequality and absolute low growth are being questioned by people, and this is a very relevant fact for European politicians to take into account.
e-fundresearch.com: To what extent has your strategy been able to benefit from this year's market environment and which particular investment themes have delivered the strongest performance contribution on a year-to-date perspective?
Eric Biassette: So far, 2016 has been a tale of two stories for our Equity strategies with a Southern European investment perspective.
In fact, our Southern European Recovery strategy, while outperforming its core markets - Italy, Spain and Portugal for instance - in terms of stock selection, suffered from the general negative views of investors, especially with regards to Italy (YTD performance of -29% for the FTSE MIB, as at end of October 2016).
On the other hand, our Euro zone Mid Cap strategy performed well, with an outperformance of +8.05% versus its benchmark and a positive absolute performance YTD of +4.7% (as at end of October 2016), thanks to good stock picking on quality stocks that proved resilient during the period.
e-fundresearch.com: With regards to the coming year: How optimistic is your view into the future and what obstacles and challenges should investors be prepared to overcome in 2017?
Eric Biassette: 2017 will continue to be subject to political events: the full extent of Donald Trump’s future policies will gradually become clearer, especially in terms of foreign affairs, economics and trading policies.
In Italy, the outcome of the December referendum will be known, with the potential to add volatility to markets. The outcome of Germany’s general elections and French presidential elections will also be closely monitored by investors. From a macro-economic perspective, the decisions from the Federal Reserve and the European Central Bank (in December) regarding, respectively, interest rates and an extension of the Asset Purchase Programme (APP) will set the tone in terms of inflation expectations and growth prospects.
In this context, we continue to focus on our investment process, based on stock selection and the analysis of companies’ results. We remain cautious on stock selection, focusing on:
- Companies with low level of debt, with visible growth prospects
- Companies able to generate positive surprises when reporting their earnings (internal re-organization, relative bolt-on acquisitions…)
e-fundresearch.com: Why should investors consider an increase in allocation to your asset class and in particular your strategy in 2017?
Eric Biassette: Following the negative stance of investors regarding Southern European markets in 2016 (all negative YTD at the end of October 2016), we would expect them to re-focus their approach and analysis on fundamentals such as companies’ business models, their strategies and their ability to create growth and generate future cash flows. By sticking to our investment process, we continue to find value in the area.
e-fundresearch.com: Thank You!
