Autor: Gérard Piasko, Chief Investment Officer

At our mid-April Investment Committee meeting we scaled down our weighting of emerging market equities, which are particularly sensitive to developments in the trade conflict.

Market Comment, May 2019

Autor: Gérard Piasko, Chief Investment Officer

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Investment Policy

Partial profit-taking in view of the stocks higher valuations

The surge in equity prices since the start of the year has now become so pronounced that a consolidation or a correction cannot be ruled out. This would apply in particular if the financial markets were to be disappointed by certain developments – such as the result of the trade dispute negotiations between the US and China, the Brexit saga, or corporate earnings. The stock market gains of 2019 are above all attributable to a hefty rise in valuations of around 15–20%. If equity markets are to make further notable gains, they will surely require positive rather than mixed data regarding the development of the global economy.

Market Comment

Equity markets hit by intensification of trade dispute

As we recently explained, the combination of low volatility (anticipating a “perfect world”) and expensive stock market valuations at the end of April was not a realistic reflection of the economic fundamentals.  These pointed to – and continue to point to – a global economy of doubtful strength, with weaknesses particularly apparent in the emerging markets and Europe. Moreover, the markets had already factored in a rosy, tension-releasing trade deal between the US and China. Yet anyone who has read Trump’s book “The Art of the Deal” can hardly have been surprised by his announcement of another ramping-up of tariffs against China, from 10% to 25%. A correction in equity markets, which in some cases were at record highs (such as the US) or had recorded significant rises since the fourth quarter of 2018 (such as the emerging markets, particularly China, but also cyclical sectors) comes as no surprise to us. We had prepared for such a scenario by scaling down our equity weighting in April, specifically our exposure to the emerging markets.

Finance Theme

Cryptocurrencies - What exactly are they?

The turbulent performance of Bitcoin over the last year has brought this cryptocurrency to the attention of the wider public. But this currency has actually been around for almost ten years, and an estimated 1,600 other alternative currencies have also sprung up in the meantime. The question is often asked whether these constructs – which only exist in the form of digital code – can really be considered currencies at all in a way that bears comparison with the dollar, euro or yen. We will return to this question later in this article. First of all it is worth establishing what actually lies behind cryptocurrencies such as Bitcoin, Ether and Ripple.

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