Investment Insights - June 2018

Please find below our, our publication "Investment insights" which will give you our vision of the market and our 3 months scenario.

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Editorial: ACTION POTENTIALS AND EQUITIES

The transmission of information observes clear rules. When the membrane surrounding a neuron is given enough stimulation, it gets excited. Its electrical potential increases rapidly, then drops even faster. During this short amount of time, the neuron stimulates its adjacent neuron then enters a resting state, ensuring that the fl ow of neural information only moves in one direction! The fi nancial markets seem to react to extreme events in the same way. A market is stimulated by information, be it positive or negative. The information spreads faster and faster and tension rises. Neighbouring markets are in turn hit by the wave of panic (or euphoria) and soon the entire planet trembles (or jumps for joy). Then we enter a resting period, when the markets seem immune to any further bad news. Indeed, they even seem to enter a state of psychological habituation, showing less and less reaction to any stimulus. When, in 2016, the British people defi ed all short-term logic and voted to take back their independence from a Europe in which they felt they did not belong, European equities had a tough few days. A few months later, Donald Trump’s election upset the markets for just a few hours... And more recently, in Italy, the impact of the unlikely alliance between two diametrically opposed parties - two (no longer quite so) openly Eurosceptical parties - brought back memories of the dark days of European deconstruction. But rest assured, Monday’s panic at the attempt to form a government was short-lived and had turned into good news by Friday evening.

We had evidently incorporated this scenario into our forecasts, but as a risk. Its likelihood has now increased, and we still believe it will have a harmful effect for the eurozone. Our central scenario of solid growth is now less probable (50%).

Inflation remains one of our main concerns, along with the trade dispute. In these circumstances, we are keeping our equity allocation at 95% and our bond allocation at 90%.

Asset allocation strategies - Stay under the radar - CPR EUROLAND PREMIUM

     By Vincent Bonnamy, Portfolio manager and Noémie Hadjadj-Gomes, Deputy head of Research

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Macroeconomic environment  - Commediante! Tragediante!

     By  Juliette Cohen, Strategist

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Our next publication will be published in July 2018. Our teams are at our disposal for any complimentary information.