Financière de l’Echiquier 15 March 2014
QQUUAATTEERRLLYY RREEVVI IEEW W BY PIERRE PUYBASSET, SPOKESPERSON FOR THE ASSET MANAGEMENT TEAM
2014 has got off to a good start. Global growth is accelerating thanks to the healthy state of the US economy and the improvement in the macro-economic backdrop in Europe. Overall, optimism remains intact on equity markets, which should continue to benefit from renewed inflows. We are nevertheless bearing in mind the fact that economic trends differ massively from one region to the next. In the US, the FED has begun to taper its quantitative easing policy, leading to an increase in long-term rates. However, the new Chairman of the US Central Bank, Janet Yellen, has also confirmed that an accommodating monetary policy is to be maintained over coming six-months periods, pending the confirmation of a strong and job-creating recovery. Until mid-2015, key rates should remain low and the environment positive for US financial markets. We are nevertheless particularly cautious about one segment: US equities, which are already fully valued, if not overvalued in certain sectors (internet and biotechnologies). In Europe, trends are improving thanks to the courageous reform programmes applied in the eurozone. However, this recovery remains too uncertain to modify the ECB’s monetary policy: Mario Draghi is doing what it takes to maintain an accommodating rates policy on a lasting basis while paying close attention to changes in inflation. An acceleration in deflationary pressure would clearly trigger a quantitative easing phase which would probably go
down well with investors. In the meantime, we have noted a significant easing in rates spreads in southern countries, accompanied by a return of flows into equities from international investors. Note that the accumulation of cash in company balance sheets announces positive news for share buybacks, dividends and M&A activity. This backdrop looks beneficial for equities markets: highly selective stock-picking should produce good results after two years of index gains. In emerging markets, greater vigilance is needed, especially since the region is very mixed with very different realities. While the reform measures implemented in China should pay off, the reality is more complex for other countries. This is notably the case in economies presenting current account deficits and suffering from less advantageous refinancing conditions. That said, valuations of emerging markets equities remain extremely attractive: we have started to identify entry points that look very promising… watch this space!
In this backdrop, and given the rally enjoyed at the end of 2013, asset managers need to be opportunist and selective. This is reflected in a strict stock-picking process for the entire Financière de l’Echiquier range: • After the hefty outperformance enjoyed by the value theme in 2013, we are maintaining a growth/value balance for coming months. Mobile funds like Agressor should be an excellent focus of asset allocations. Several ideas remain to be explored for Echiquier Value, however, and this is true for the whole of Europe. • In terms of fixed income management, we continue to prefer corporate bonds. In 2013, short-term paper was favoured systematically whereas in 2014 we need to be more mobile and actively manage duration. Our diversified fund ARTY is following this strategy closely and should enjoy a serene year. The Financière de l’Echiquier funds are primarily invested in equities and company bonds and present the risk of capital loss. For further information, please refer to the funds’ prospectus available on simple request from the asset management company on +33.(0)1.47.23.90.90 or contact your usual representative. About Financière de l’Echiquier - Created in 1991, Financière de l’Echiquier is now one of the leading independent asset management companies in France with €7.7bn in assets under management and team of 95 staff. It is wholly-owned by its managers and employees. Its business: management of savings and financial investments on behalf of individual clients, financial advisors and institutional investors . 53, avenue d’Iéna – 75116 Paris – Tél. : +33 (0)1.47.23.90.90. – Fax : +33 (0)1.47.23.02.46. – www.fin-echiquier.fr