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BCGE group investment strategy
2nd Quarter 2017
EDITORIAL
Time for complications
has come!
FOCUS
Economic and financial forecasts
2017-18: In balance?
Constantino Cancela
2
BCGE Group Chief Investment Officer
EDITORIAL
Time for complications has come!
As the largest international watchmaking fair is closing its doors
in Basel, it is tempting to draw a daring parallel between fine
watch mechanisms and the world's current situation. Watchmakers have become masters in the art of complications, with
layers superimposed over the basic mechanical movement
(moon phases, minute repeater, chronograph, chimes, annual
and perpetual calendar mechanisms and many more). Could the
political calendar of these last twelve months have been conceived by a master watchmaker? In fact, when we look closely
at the political situation in the United States, Great Britain and
the major European states, the only conclusion that can be
drawn is an immense complication! Beyond the ballot box surprises and far from being anticipated by the polls.
The situation in the United States is very complicated. The
“surprise president” is succeeding in uniting virtually everyone
against him, after a mere 70 days in power, rather like an elephant in a china shop (with no allusion to his surname). On
the political front, he has to deal with an opposition force in his
own extreme conservative ranks, to such a point that his flagship project to revise Obamacare did not get as far as the voting
stage in Congress; a bad omen for the other battles to come,
particularly in terms of taxation.
In civil society, in the broadest sense, his first decrees have collided head-on with several judges who have blocked their adoption. Haphazardly, all blocs are nearly united to confront! The
media, as shown by the New York Times, have initiated a sort
of crusade against the “fake news made in Trump”. Progressive
economists, led by the Nobel prize winner Joseph Stiglitz, are
ringing the alarm bell over the desires for protectionism held
by the president. Scientists and NGOs are worried about the
potential toll on the climate and are speaking out strongly, in
particular to fight against the Keystone XL pipeline project with
an appropriate slogan “Make the Earth Great Again”. Stars
(singers or actors such as the iconic Meryl Streep) are joining in
the protest. Even decision-makers in Silicon Valley are starting
to fear for the future of their businesses. They all seem to be rallying to denounce the policies of the new administration. To this
long list of objectors, we could also add the local elected representatives defending their entitlements against the project of
discriminatory cuts in budget spending, the writers, the sportsmen, in short, all average people. Never in the history of the
United States has a president failed so badly to win unanimous
support: the honeymoon of the first 100 days is a long way off!
As we wrote three months ago, the harsh reality of political
life is in the process of catching up on the elected candidate’s
promises. We should never forget that politicians’ promises only
bind those who believe in them!
BCGE Group Investment Strategy
2nd Quarter 2017
On this side of the Atlantic, it will undoubtedly be just as complicated! Now that Downing Street has launched the divorce process with the European Union (Brexit), everyone, both in London
and Brussels, is wondering about the nature of the rupture, on an
amicable basis or not. Some are convinced it will work, others want
to present as huge a bill as possible for the separation. And what
about that lack of unity which is emerging in the United Kingdom,
in Scotland and in Northern Ireland?
In mainland Europe, we cannot yet speak of a united front, for the
simple reason that the three major euro zone states are on the eve of
possible changes in policy directions and that their leaders are busily
focused on a national agenda. Starting with France where the situation could also be highly complicated as from the month of May. It
would appear that none of the three candidates leading the voting
intentions (but be wary of the polls…) seems capable of mustering a
solid majority in June’s parliamentary elections, except perhaps François Fillon. Marine le Pen would be an opposition president and Emmanuel Macron would have some trouble unifying a very divided left.
A complicated situation for the three of them.
As you can see, the political calendar of the coming months looks
like a watchmaker’s complex mechanism, with moon phases, some
keeping time and citizens finding it hard to tell the time!
CONTENT
The uncertainty indicators of economic policies are beating all
records, whereas the markets are showing little concern. It has to
be said, thankfully, that the economic calendar is much clearer.
Our analysis of the real economy shows a situation which is far
more legible, allowing us to evacuate the risk of deflation or stagflation, of a rising dollar (the catalyst for the drop in world trade)
and even sustained floundering in negative rates. The spectres
that have haunted investors in recent years have most certainly
faded away. But businesses continue to function very well, the
economic indicators are pointing positively and investors are cautiously turning a blind eye to the situation.
The economic scenario can almost be read like a simple mechanical watch, with a well-adjusted and well-oiled movement. For this
reason, we continue to favour equities in our portfolios by focusing, as before, on regions and businesses which invest the most
in their productivity and their growth, particularly on the Swiss
market. We remain cautious of the risk of rising rates by maintaining a relatively short duration in the bond segment, a strategy
that has paid off since summer 2016, without compromising the
quality of borrowers.
EDITORIAL
Time for complications has come!
2
FOCUS4
Economic and financial forecasts 2017-18: In balance?
MACRO SUMMARY
6
MARKET SUMMARY & STRATEGIC DECISIONS
7
ECONOMIC & FINANCIAL OUTLOOK
8
SWITZERLAND
Macro9
Interest & exchange rates10
Stock markets11
EUROZONE
Macro
Interest & exchange rates
Stock markets
12
13
14
UNITED STATES
Macro
Interest & exchange rates
Stock markets
15
16
17
EMERGING REGION
Macro
Emerging Debt
Stock markets
18
19
20
COMMODITIES21
BCGE Group Investment Strategy
2nd Quarter 2017
3
Valérie Lemaigre
4
Chief Economist
FOCUS
Economic and financial forecasts 2017-18:
In balance?
Forecasting often appears vain, imprecise and open to all sorts
of mockery towards economists. And yet, without it, and the
markers it puts in place, chance would leave too much leeway
for error of judgement or uncertainty, the bane of investors,
wheather financiers or business leaders. More than the accuracy
of calculating the figures, it is the nature of the momentum and
the forces which come into play in getting the right balance
which will really matter.
2016 and the first few months of 2017 already draw the outlines of a slightly impressionist-style picture, albeit already wellsteeped in colour. The indicators are lush, like Monet’s gardens,
and the sentiment of economic players and of the market could
not be more serene. While admittedly we must tone it down,
the 2016-17 environment is one of a return to equilibrium, after
two years 2014 and 2015 torn apart by the dollar’s rapid appreciation. The relative stability regained by the dollar in 2016
has reversed the drop in world exports, and with it, that of the
manufacturing industry and the exploitation of heavily depreciated commodities. The business sector has renewed with a
positive outlook for activity and consequently a desire to project
itself into the future. The private individual, whose purchasing
power benefited artificially from rock-bottom energy prices and
borrowing costs, now has a more reassuring source of income,
that of work. Naturally, there are glaring inequalities and too
many people are marginalised, but the improvement in the employment market on both sides of the Atlantic offers a basis
for more stable and solid growth. All the economic players are
working towards a level of growth in 2017-18 which should be
moderate but balanced between sectors and regions.
BCGE Group Investment Strategy
2nd Quarter 2017
The business sector, both in services and manufacturing, is contributing to this expansion of activity which, combined with
renewed price stability, is helping profitability to pick up. We
can reasonably qualify the economic situation as a homeostasis
which involves regulating the different constants between normal values, or even more simply, “in balance”.
After years where fear of deflation and stagflation has clouded
the outlook, resilience as the capacity to renew with an equilibrium after major shocks seems to qualify this growth. But,
let’s make no mistake, expansion will remain moderate, without
sustainable acceleration which could only be set in motion with
the help of a rediscovered productivity (see our Q3 2016 publication).
What factors could derail this seemingly non-issue scenario? Are
they economic or political?
Among the end-of-cycle economic arguments, that of the average life of the growth phase in the United States (eight years),
is neither a necessary nor satisfactory reason. To spell the end
of the economic cycle, you need to have reached those areas
of tension which would justify corrections. For example, the accumulation of surplus capacities in a sector where demand no
longer meets excessive projections would be a source of adjustment (e.g.: the IT bubble in the early 2000s, the commodities
bubble of 2008, the real estate shocks of 1990 and 2008). In
these cases, investors often err by being over-optimistic, borrowing up to levels that become too sensitive to interest rate
changes, which by the way are necessary to limit price slippage
FOCUS
in these favoured sectors. Mixed in with the resultant recession can come a financial crisis stemming from a banking sector fragilized by a lack of caution and by their customers’ nonperforming loans. Lastly, other external sources of shocks can
also arise in the event of high volatility on the rates of certain
prominent currencies such as the dollar or the euro, or on commodity prices, particularly oil, to which the economy is still very
sensitive.
But, since 2008, the economic cycle has been very progressive
with slow paces of activity, denounced on several occasions,
and the root cause for a lot of worries: deflation, stagflation,
negative growth. The debt of individuals and businesses, including banks, have been drastically reduced. Yet, the aggregate
total has never been as high, fuelled mainly, in the developed
countries, by sovereign debt, a segment whose correction catalysts are significantly different and closely linked with the confidence placed in the underlying political project.
This is where political uncertainty can take shape, even if it does
not direct the economic scenario. In the United States, the risk
is associated with the realisation, or not, of President Trump’s
stated intentions which, so far, have been significantly blocked
by the American Congress. In Europe, in addition to Brexit going
ahead, the uncertainty is still tied to the outcome of the ballot
boxes on a path where France, Italy and Germany, the region’s
heavyweights, may have concerns over their aspirations and the
viability of the joint political project. For the political risk to upset the economic utricle1, the guarantor of current growth, and
derail the economic cycle in progress, it would have to be trans-
formed into a major crisis of confidence, a source of weakening
for the currency concerned and asset defection, even government debt. While some put together such extreme scenarios,
which are not beyond the realms of possibility, they attribute a
major, long-term weight to the political orientation whereas it
ought to be dealt with as a more isolated event within economic
trajectories; it is a source of temporary volatility more than a
decisive fundamental force. If on the other hand, these extreme
political movements in developed countries were to find their
justification in the demographic structural shock of population
ageing, they could nonetheless feed the economic nostalgia
(favouring heavy manufacturing, fossil energies, protectionism)
likely to transform the nature of growth and the balance obtained.
Most economic analysts, including ourselves, do not lapse
into these extremes and the constructed scenarios are essentially based on solid fundamentals which are balanced and
shared. Surprises could occur if productivity, at a standstill in
recent years, were to provide an acceleration factor for growth.
Among the best exposed regions, it is worth remembering that
the United States and Switzerland offer a conducive framework
which businesses have grasped to support their productive investments in technology, research and development of innovation, both in terms of production and management processes.
More than ever, businesses remain the spearhead for creating
long-term added value.
1 small
pocket, located in the inner ear, which plays a role in maintaining balance.
The moderate cyclical growth has not created major imbalances or excessive indebtedness which requires an automatic adjustment. Public debt could be a source of concern.
United States: economic growth cycles (GDP)
United States: debt of economic actors
Index rebased 100 = economic cycle trough
As% of GDP
140
140
135
120
130
100
125
80
120
115
60
110
40
105
100
09
10
Cycle years 2010
Cycle years 1990
11
12
13
Cycle years 1970
Cycle years 2000
14
15
Cycle years 1980
16
17
20
1980
1985
1990
Individuals
Non-financial enterprises
1995
2000
2005
2010
Financial sector
Public sector (government)
BCGE Group Investment Strategy
2nd Quarter 2017
2015
5
MACRO SUMMARY
Recent trend
GDP growth
It comes as no surprise, economic activity has pursued
its moderate expansion path across all regions.
The recovery of the sentiment of economic
players (consumers and business leaders) and financial
players is being driven by a rebalancing of growth,
but also in the United States by a wave of euphoria
which is bound to be short-lived unless concrete
measures in favour of business activity are delivered.
Annual percentage change
6
5
Growth
4
3
2
1
0
-1
-2
-3
Recession
-4
Underpinned by the rebound in commodity prices,
inflation has suddenly picked up in the developed
world. Conversely, thanks to the stabilisation of the
dollar, it has receded in the Emerging countries.
Widely expected by the markets, the Fed has once
again raised its key interest rate. Pending a stable and
lasting return of inflation, monetary policy in Europe
has remained unchanged. In the Emerging world,
the slowdown in inflation has enabled some major
countries’ finance ministers to ease their monetary
policy.
-5
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
United States
Eurozone
Switzerland
BCGE forecast
Consumer price inflation
Annual percentage change
6
Inflation
4
2
0
-2
Outlook for 2016-17
In the context of growth being more balanced and
widespread, economic expansion will continue at a
moderate pace covered by the dollar’s stability.
Private individuals and businesses in the various
regions are finding prospects to activate their consumption and bolster activity.
The dissipation of the base effects, tied to
commodities, will imply a release in recent
inflationary pressures. While inflation has now
normalised in the United States, it will remain low in
Europe due to the absence of wage pressures.
The Fed will still be going alone at progressively
tightening its monetary reins. Whereas the BCE will
progressively adjust its asset purchase program.
Deflation
00
01 02 03
04 05 06 07
United States
Eurozone
BCGE Group Investment Strategy
2nd Quarter 2017
10 11 12
13 14
15 16 17
18
Switzerland
BCGE forecast
3.0
UK
2.5
US
BCGE US
2.0
DE
1.5
IT
1.0
BCGE EZ
FR EZ
JP
0.5
SP
CH
BCGE CH
0.0
0.0
0.5
1.0
GDP growth (annual variation in %)
End-of-cycle catalysts are absent and the political risk
on both sides of the Atlantic remains a one-off event
and excluded from the economic scenarios, as long as
it does not set out any new, clear economic orientations.
08 09
Forecasts 2017
Inflation (annual variation in %)
6
1.5
2.0
2.5
3.0
MARKET SUMMARY & STRATEGIC DECISIONS
Asset allocation
Equities
The prospects of moderate economic growth and the acceleration of corporate earnings advocate in favour of equities, at the
expense of bonds and cash
The political risk on both sides of the Atlantic may accentuate
stock market volatility which has been negligible in recent months
and apply certain temporary pressures on the government's debt.
Maintain moderate overweighting on equities,
maintain underweighting on bonds,
Bonds
Cash
++
+
--
maintain overweighting position on cash.
Equities
After a year of contraction, companies’ earnings, particularly industrial
companies, are picking up thanks to the growth in activity and prices
The high valuations may accentuate phases of volatility fuelled by
political uncertainty
CH
in%
100
EUROPE
US
75
50
41 41
37 37
Our selection and allocation favour the businesses' capacity to
EM
25
generate productivity
12 12
10 10
0
Maintain high exposure to the Swiss market,
maintain bias towards American equities,
maintain exposure in Emerging countries.
Bonds
Short term
The well-advanced normalisation of rates and inflation anticipations
are restricting the increase expected on American yields
reducing the normalisation potential
The credit risk on corporate borrowings continues to be supported
by the growth scenario. The political risk may also directly affect
sovereign debt which is not playing the safe haven role
5 years
USD
CHF
Long term
EUR
USD
+
--
give preference to quality corporate bonds.
Currencies
The foreign exchange market remains focused on the dollar
trend which should fluctuate around current levels according to
its fundamentals
Other than the fundamentals, the currency is sensitive to the political risk, in the short term, which may affect the rates of the dollar
and European currencies
EUR
++
In Europe and Switzerland, ongoing non-conventional policies are
Avoid investments offering negative yields,
maintain the shorter maturities in Europe, go longer in the United States,
CHF
CHF
EUR
USD
++
+
--
The fundamental trend of the major currencies advocates in favour of relative stability, unless a major confidence shock is prompted by the political risk
Previous
Recent
BCGE Group Investment Strategy
2nd Quarter 2017
7
8
ECONOMIC & FINANCIAL OUTLOOK
ECONOMY
GDP %
Inflation %
Recent
2016
Last data
2017
2018
Switzerland
1.3
0.3
1.4
1.6
Eurozone
1.7
1.6
1.6
1.8
United States
1.6
1.9
2.3
2.6
Emerging zone
4.0
n/a
4.5
4.8
Switzerland
-0.4
0.4
0.5
0.4
Eurozone
0.2
1.8
1.7
1.5
United States
1.3
2.5
2.6
2.5
Emerging zone
5.5
n/a
4.5
4.4
MARKETS
Target rate in %
10 y Interest rate %
Currencies
Equities
Commodities
Forecasts
3 months
12 months
0.0
-0.75
-0.75
-0.3
0.0
-0.40
-0.40
0.3
0.7
0.2
1.00
1.50
-0.1
-0.1
0.0
0.1
-0.1
0.1
Eurozone
0.1
-0.5
0.4
0.3
0.5
0.7
United States
2.4
0.2
2.5
0.1
2.8
2.9
USD/CHF
1.02
3.0
1.00
-1.8
1.02
0.98
EUR/CHF
1.07
-0.8
1.07
0.0
1.07
1.08
EUR/USD
1.05
-3.5
1.06
0.8
1.05
1.10
SMI
8220
-6.8
8689
5.7
8720
9000
Stoxx 600
361
-1.7
375
3.8
375
400
S&P 500
2239
8.5
2385
6.5
2440
2500
MSCI EM
862
8.9
944
9.4
940
980
Crude oil Brent
57
56.9
52
-8.9
50
60
1157
9.0
1200
3.7
1150
1300
31.12.2016
20.03.2017
Value
2016*
Switzerland
-0.7
0.0
-0.7
Eurozone
-0.3
-0.2
United States
0.5
Switzerland
Gold
Text and values as at 20.03.2017
* Change in%
BCGE Group Investment Strategy
2nd Quarter 2017
Value
YTD*
SWITZERLAND
Macro
Growth moving from weak to moderate
Growth remained weak in Switzerland at the end of last year.
With less than 0.1% of quarterly variation, gross domestic
product moved up by 1.3% over the full year 2016. Household
consumption succeeded in limiting the negative effects of the
downturn in foreign trade. Business investment also held back
the GDP progress, whereas stock variations artificially bolstered
growth.
Activity is founded on a base of moderate growth which has
become more balanced but not sufficiently extended to cover
all sectors yet. The sentiment of the industry, very optimistic in
this early part of the year, is underpinned by export prospects
which are well-oriented once again and enabling a return to investment expenditures. The 2018 projection horizon should see
growth rebalanced, bolstered by the world economic environment and fairly stable prices. Productivity remains the only real
key to acceleration.
Exit from deflation?
After more than two years below zero, inflation resurfaced earlier this year, reaching 0.6% in February. This acceleration is essentially the statistical reflection of the impact of oil prices, as
mirrored in the upward pressure recently passed on in air transport fares. Once this effect is fully integrated, inflation should
slightly dip and interrupt the acceleration recently observed. Inflation should not strongly firm up this year, unless an external
shock hits the currency or commodity prices. In fact, wage pressures are fairly unlikely in the current climate as the employment
market remains quite lacklustre.
Switzerland: exports and exchange rates
Annual change in %
Annual change in %
20
-30
15
-20
10
-10
5
0
0
-5
10
-10
20
-15
-20
02
04
06
08
10
12
14
30
16
Nominal effective exchange rate (right scale)
Exports without stones and precious metals
Switzerland: consumer prices inflation
Annual change in %
3
2
1
0
-1
-2
02
04
06
08
10
12
14
16
Headline inflation
Underlying inflation (except energy and food)
Macroeconomic data : Switzerland
In this weak growth and inflationary environment, the Swiss National Bank’s monetary policy has remained unchanged. No exit
from current policy is likely to be seen before 2018. Interventions on the currency markets are still concidered, knowing that
temporary pressures on the franc could emerge as a result of the
upcoming elections in the euro zone.
2017
2018
GDP %
1.4
1.6
Inflation %
0.5
0.4
Unemployment rate %
3.4
3.3
Target rate %
-0.75
-0.75
10 year interest rate %
0.10
0.40
USD/CHF
0.98
1.00
EUR/CHF
1.08
1.15
9000
9650
EPS
5%
7%
PER
16.8
16.8
SMI
Index
BCGE Group Investment Strategy
2nd Quarter 2017
9
10
SWITZERLAND
Interest rate
Currency
Switzerland: exchange rate
Switzerland: interest rate
In %
3.0
1.30
2.5
1.25
2.0
1.05
1.00
1.20
1.5
1.15
1.0
0.95
1.10
0.5
1.05
0.0
0.90
1.00
-0.5
-1.0
0.85
0.95
09
10
11
12
13
14
15
16
17
10 year Confederation bond
3 month Libor CHF
12
13
14
15
16
17
EUR/CHF
USD/CHF (right scale)
Short-term rates: stabilisation
Franc: recent trend has taken a turn
The yield on 2-year Confederation bonds has only chalked up 2
basis points since the beginning of the year. In this context, the
market has not planned for any interest rate rises before long.
The prospects for domestic growth and inflation do not point to
any changes. Likewise, external influences stemming from the
ongoing quantitative easing programmes in Europe should continue to weigh on short-term rates. Short-term rates will nevertheless remain sensitive to any sign of monetary normalisation
which could appear in 2018.
The value of the franc slightly appreciated over the quarter
against partner currencies, particularly against the dollar and the
pound sterling. Against the euro, the value of the franc has not
moved that much after all. The appreciation movements against
the dollar were balanced out, however, by the franc’s depreciation against Emerging currencies.
Long-term rates: sensitive
Longer maturity rates were once again particularly volatile during the first quarter this year. While yields at maturity declined
somewhat end-February, they then picked up as spring started
to show its nose. To be more specific, the benchmark rates for 5
and 10-year durations have risen by some 15 basis points since
1st January, at a cost for investors of around 1% and 2% respectively. Even though inflation anticipations have normalised,
bond prices are still sensitive to ongoing economic activity and
to the rise in consumer price indices. Real rates are still negative
over the whole curve up to 10-year durations.
Sensitivity to excessive valuations and the growth scenario mean
there is a preference for the credit risk on corporate debt as
opposed to government debt. We are therefore remaining very
prudent to avoid exposing capital to this heightened volatility of
long maturities.
BCGE Group Investment Strategy
2nd Quarter 2017
While there is a tendency for the fundamentals to want to appreciate the Swiss currency, interest rates keep trying to hold back
the extent of the appreciation by dissuading investors from holding francs. In fact, standing at almost 5 billion at the beginning
of the year, the balance of trade surplus has reached a new alltime record. This movement reflects an increase in exports, as a
result of the strong vitality of the chemical and pharmaceutical
industries.
The stability of the Swiss currency therefore relies on the financial behaviour of investors towards so-called safe investments. In
2016, foreigners withdrawing from Swiss assets enabled the currency to stabilise, whereas resident investors opted for assets in
their region but without repatriating their foreign assets. All in all,
the strong pressure on the franc has receded.
Stabilisation of the franc remains a delicate operation which the
SNB must conduct by managing the reserves, the major instrument of monetary policy these days. But as a safe-haven currency, any political risk sparked by the European agenda could once
again inflate the stock of currency reserves. Other than these oneoff episodes, the franc’s overvaluation should gradually decrease
though a firmly-rooted improvement in European fundamentals.
SWITZERLAND
Stock markets
Solid results
The Swiss stock market has experienced a sharp rise over the
last three months. Until then, it was mainly the small- and midcaps that had attracted investors’ favour, but the whole market
is now benefiting from the rise. Even though all sectors have
followed this momentum, technology and healthcare have been
the most dynamic.
Switzerland: stock market indices
Rebased on 100 = -5 years
180
160
140
120
This bullish trend reflects the good health of companies which,
for the most part, have announced solid results for 2016 together with optimistic guidance for 2017. The rare ones which
released disappointing figures, or which revised their guidance
down for the current year, have been severely sanctioned by the
market.
100
High multiples impose a selective choice. The increase in earnings forecasts allowed to somewhat moderate the increase in
price/earnings multiples, but the Swiss equities remain relatively
expensive by historical comparison. Consequently, they become
sensitive to any disappointment; a selective choice is more important than ever.
Switzerland: stock market fundamental indicators
Exporting companies still on a positive track
The overall environment continues to be favourable for Swiss
companies, and more especially for exporting companies. In addition, the large majority of businesses should see an increase in
earnings in 2017, after the dip in 2016. However, we continue
to favour those which invest significantly in their production facilities and in R&D and we are still remaining cautious regarding
financial stocks.
80
12
13
14
15
16
17
SPI EXTRA
SMI
Price / earnings ratio
18
Annual percentage change
12
17
10
16
8
15
6
14
4
13
2
12
0
11
-2
10
12
13
14
15
16
17
P/E SMI
Earnings growth forecast (right scale)
Summary
Growth in Switzerland is picking up with the assertion of moderate world growth.
Inflation has moved back into positive territory but will remain low in the absence of wage pressures.
The pace of growth is insufficient to reduce unemployment.
Monetary policy will remain in line with its recent history without any changes in rates. Interventions on forex reserves to stabilise the safe-haven currency are not excluded in a context of European political risk.
The scenario in favour of a return of profits continues to enhance the quality of the fundamentals of the businesses
we favour in our regional equity allocation and in our bond allocation as well.
We must remain cautious regarding long-maturity government bonds, which are sensitive because of their excessive
valuation.
BCGE Group Investment Strategy
2nd Quarter 2017
-4
11
12
EUROZONE
Macro
Continuation of moderate growth
Driven by household consumption, the economy of the euro
zone ended the year on a positive note, with quarterly growth
coming out at 0.4%. As no surprise, this figure falls into the
same pattern as earlier growth rates, enabling activity in the
euro zone to progress by around 1.7% over the full year 2016.
During the autumn, public expenditure and corporate investment contributed to growth, unlike foreign trade whose net effect was negative due to a greater increase in imports.
Growth in Europe is benefiting from the improvement in the
world export cycle and its prospects, particularly thanks to its
exposure to activity in the Emerging countries. The rebalancing
of growth in favour of industry, especially exporting industry, is
activating the recent related indicators such as industrial production, the capacity utilisation and the order book. In this context,
investments will continue and the construction industry is part
of this movement. Let us not forget that financing conditions remain extremely attractive. The rebalancing of growth, embracing most European regions, is helping unemployment contract
and stimulating the confidence of consumers moving towards
consumption. The factors of production are geared up to fuel
tomorrow’s growth which only a major political shock could derail. So, we should keep an eye on the busy political agenda for
this year.
Temporary acceleration of inflation
Still negative less than a year ago, inflation peaked at 2% in February. But this surge is merely temporary, as it reflects a statistical effect on energy prices which will have rapidly worn off after
March. This is borne out by the underlying inflation statistic,
specifically excluding the influence of energy prices, which remained constant at less than 1%. The regional disparities, which
are still significant, clearly reflect the employment market where
wage pressures will remain simply anecdotic. Inflation will stabilise in 2017 and 2018, without accelerating, and will therefore
not call for any reaction on the part of the ECB’s monetary policy
on rates.
Eurozone: Consumption and economic climate
Annual growth in %
120
110
4
100
2
90
0
80
-2
-4
70
00
02
2nd Quarter 2017
04
06
08
10
12
14
16
Private consumption
Consumer confidence (right scale)
Eurozone: unemployment rate
Annual change in %
8
6
4
2
0
-2
-4
08
Spain
Italy
10
12
14
16
France
Germany
Macroeconomic data : Eurozone
2017
2018
GDP %
1.6
1.8
Inflation %
1.7
1.5
Unemployment rate %
8.8
7.8
Target rate %
0.00
0.00
10 year interest rate %
0.70
1.10
EUR/USD
1.10
1.15
Index
400
430
EPS
11%
7%
PER
14.9
14.9
Stoxx 600
BCGE Group Investment Strategy
Balance of responses
6
60
EUROZONE
Currency
Interest rate
Eurozone: interest rate
Eurozone: exchange rate
In %
2.5
1.6
1.00
2.0
1.5
0.95
1.5
1.4
1.0
1.3
0.5
1.2
0.0
1.1
0.90
0.85
0.80
-0.5
0.75
0.70
1.0
12
13
14
15
16
17
10 year Bund
3 month Euribor
0.65
12
13
14
15
16
17
EUR/USD
EUR/GBP (right scale)
Short-term rates: status quo as per the ECB
The euro is sensitive to the political risk
The yield on 2-year maturities reached an all-time low, in negative territory, before edging up. The ECB’s intervention on bond
assets may have distorted this market segment. In the absence
of changes being expected regarding the ECB’s monetary policy,
normalisation still is, therefore, nothing but a pipe-dream. As
well as the economic fundamentals remaining on shaky ground,
the risk associated with the political agenda in Europe advocates
maintaining a very expansionist policy in 2017. The normalisation
process will only get a positive show of hands in 2018 and, on the
basis of anticipations, 2-year rates could move up.
During the early months of the year, the euro has gained nearly
2% against the dollar. Despite the increase in the interest rate differential, the dollar has not reached any new milestone. With the
exception of China, the major Emerging countries have generally
seen their currencies move up against the euro.
Long-term rates: pending normalisation
As a result of the delayed effects of inflation anticipations being
adjusted, long-term rates in the euro zone have risen, fuelled by
the resolutely optimistic sentiment of economic players. The reduction of 20 billion euros (down to 60 billion), as from 1st April,
in the monthly asset buy-up programme will continue to affect
the balance between the more limited supply and the demand
for bonds.
On the other hand, the targeted purchases are bound to limit the
tension that appeared on the sovereign credit premiums of some
states. The political risk which will punctuate the second and third
quarters of the year is having an effect on the most extreme patterns which currency and sovereign debt, soaring rapidly since the
2008 crisis, are particularly sensitive to. The recent movements
on French debt rates are evidence of this (differential of nearly
70 basis points between French and German rates). Once these
hurdles have been cleared, the markets will again focus on the
rates curve's normalisation prospects. Meanwhile, opportunities
are still too rare on the European bond market.
Market attractiveness reflected in a current account surplus is
counterbalanced, at the moment, by the lack of financial attractiveness. Hence, zero and negative interest rates continue to represent an argument against the euro. The lack of interest on the
part of foreign investors combines with the investments of residents mainly in foreign bonds (535 billion between January 2016
and 2017). While the balance of these financial asset operations
in favour of outflows (390 billion over 12 months) offsets the
commercial inflows of nearly 360 billion, the currency is stabilising
but without signalling any weakness in the euro.
However, the currency, as the region’s ambassador, could undergo pressure associated with the political risk, the vehicle for
volatility on the foreign exchange market. Other than temporary
fluctuations and in the absence of any major confidence shock,
the euro could firm up slightly against the dollar, which is more in
phase with its external fundamentals.
BCGE Group Investment Strategy
2nd Quarter 2017
13
14
EUROZONE
Stock markets
Upwards in a cautious environment
Over the first quarter, the European equities indices recorded
an increase fuelled by encouraging signs from the world economy and the publication of good corporate results. Nevertheless, concerns linked to the political risks did lead to a couple
of volatility sessions. Commodity producers and oil companies
suffered in particular. The increase in risk aversion was favourable to the defensive sectors, telecoms and utilities. The finance
sector pursued its rebound, initiated in the fourth quarter of
2016, bolstered by an anticipated earnings improvement in a
reflationary environment.
Eurozone: stock market indices
Rebased on 100 = -5 years
200
180
160
140
120
100
80
Earnings rise confirmed for 2017
The positive fundamental trends observed towards the end of
2016 have been confirmed. After several years of stagnation,
European companies will record a double-digit earnings increase
in 2017, in particular thanks to operating leverage. In fact, in
a context of an upturn in activity on the domestic market and
in the Emerging countries, businesses are now benefiting from
the restructuring operations conducted over the last ten years,
and now delivering margin improvements. The 2017-18 horizon is making this improvement visible. European markets are
trading at a discount compared to the American market and in
line with their historical average. However, politically generated
uncertainties, mainly focusing around election results in several
European countries together with the measures adopted by the
new American administration may stimulate a new volatility and
temporarily weigh on the European stock market. The fundamental selection will therefore welcome its active management
approach.
12
13
14
15
16
17
Stoxx 600
MSCI Small cap Europe
Eurozone: stock market fundamental indicators
Price/earnings ratio
18
Annual percentage change
14
16
12
14
10
12
8
10
6
8
4
12
13
14
15
16
17
P/E ratio
Expected earnings growth (right scale)
Summary
Euro zone growth is balanced and has reinforced. The positive trend in world activity will continue to provide a solid
base for growth while the improvement in employment will fuel consumption which has been curbed for too long.
The recent return of inflation at 2% is only temporary, and after the slip back in the spring, the level of inflation will
remain stable, below the ECB’s target. In the absence of an underlying inflation acceleration,
the ECB will stick with its monetary rates policy.
The upturn in profitability, underpinned by activity, the return of inflation and the efforts on margins, advocate together in favour of equities.
Corporate debt, at the expense of sovereign debt, continues to attract in an environment of growth.
Nevertheless, the ECB’s repurchases, even though they have been trimmed back, maintain a certain ceiling to the rise
in rates. In the absence of normalisation but with excessive valuations, caution is called for on these assets so as to
ensure capital protection, especially long maturities.
With the euro, European government debt is sensitive to the risk associated with 2017’s political agenda.
If we steer clear of this segment, it probably means being able to avoid the jolts that are bound to affect the finance
sector which is also worth limiting.
BCGE Group Investment Strategy
2nd Quarter 2017
UNITED STATES
Macro
Growth: too much optimism?
After the strong progress supported by exports during last summer, American growth fell back at the end of last year. During
the autumn, the annual expansion of activity stood at less than
2%. Once again, growth has been stimulated by household
consumption. Despite exports still being under pressure, business investment has joined the growth movement. Even though
industrial sentiment is at the highest point, activity is still very
moderate, with no significant acceleration in the indicators such
as industrial production, the capacity utilisation rate, or the order books. Growth is now more balanced between services and
manufacturing, but the risk of disappointment is still very much
present, compared with the strong expectations of some economic players. In fact, the intentions of the new American administration in favour of business activity (infrastructure projects
or tax cuts) still lack precision. The first initiatives have actually
been blocked by Congress and financing issues.
However, the ingredients for American growth are proving to
be solid and prolonging the growth cycle in the absence of endof-cycle arguments such as excess capacities or debt levels that
warrant adjustment. The new elements of reflationary economic
policies, if they materialise, are more a source of surprise and
acceleration.
Inflation has normalised
Inflation accelerated once again over the last few months. Having broken through the symbolic 2% barrier at the end of last
year, inflation moved up to 2.8% in February. While this level
reflects the rebound in oil prices over 12 months, underlying
inflation has been fluctuating around the 2% mark for more
than a year. After a peak reached in March and in the absence
of any targeted measure regarding the rise in healthcare prices
or imported goods, inflation should continue to be moderated
by modest paces of growth and a more generous, but not excessive, wage distribution. In raising its key interest rate again,
monetary policy is in line with the normalisation of inflation.
Looking ahead to 2018, the key rate could be close to 2%.
United States: GDP growth and contributions
Quarterly change annualised in %
6
4
2
0
-2
-4
12
Stocks
Public expenses
13
14
Foreign trade
Fixed investment
15
16
17
Private consumption
GDP growth
United States: Oil prices and inflation
Annual change in %
Annual change in %
200
6
5
150
4
100
3
2
50
1
0
0
-1
-50
-100
-2
08
10
12
14
-3
16
Oil price in USD/brl.
Inflation (right scale)
Macroeconomic data : United States
2017
2018
GDP %
2.3
2.6
Inflation %
2.6
2.5
Unemployment rate %
4.6
4.6
Target rate %
1.50
1.75
10 year interest rate %
2.90
2.70
EUR/USD
1.10
1.15
2500
2720
EPS
8%
9%
PER
17.7
17.7
S&P 500
Indice
BCGE Group Investment Strategy
2nd Quarter 2017
15
16
UNITED STATES
Interest rate
Currency
United States: interest rate
United States: exchange rate
In %
Index, JPY/USD
3.0
130
1.5
2.5
120
1.4
2.0
110
1.3
1.5
100
1.2
1.0
90
1.1
0.5
80
1.0
70
0.0
12
13
14
15
16
17
10 year T-Bond
3 month Libor USD
12
13
14
Trade-weighted exchange rate USD
JPY/USD
15
16
17
0.9
AUD/USD (R.H. Scale)
Short-term rates are picking up
Dollar: market consensus rejected
The approach of the Fed’s March meeting pushed short-term
rates up, in anticipation of a tightening. Since then, the 2-year
rate is repositioning in favour of the gradual normalisation of
monetary policy continuing. The exact momentum of future rises
will depend on the evolution of the fundamentals which may still
be affected by any decisions that could be taken by the American
government in favour of activity and inflation.
Appreciation of the dollar halted after the end-of-year movement
following the presidential election. Against most of developed
and Emerging country currencies, the value of the dollar actually
fell back, by nearly 2% against the euro and the franc in particular. Its downturn against the Mexican peso even exceeded 7%.
Against the yen, the dollar also depreciated even though the Bank
of Japan continued to conduct its quantitative easing policy. The
BoJ notably modified its buying, opting for German bonds at the
expense of US Treasury bonds. This fact can be interpreted as a
lesser concern from the Japanese authorities about the appreciation of the yen against the dollar than against that euro.
Low potential for the rise of long-term rates
Over the last 3 months, long-term rates have fluctuated around
the levels reached at the end of last year. Inflation anticipations
which had rapidly pulled rates up around year-end have now normalised, and the ongoing rise in long-term rates is tied to the
acceleration in growth to bring real rates out of negative territory.
While the yield on 10-year Treasury bonds may still progress under
the 3% threshold, exceeding that level would signify a significant
acceleration of the growth and inflation fundamentals, or a desire
on the part of bond investors to reassess the credit risk premium
on sovereign debt. In addition, it is worth noting that the automatic reduction in progress and future in the Fed’s balance sheet
is adding a few basis points to the rates curve. Grappling with the
different maturities of the curve, the Fed, through its monetary
and liquidity policy, needs to avoid the curve drop too quickly, as
this is traditionally the precursor of an economic slowdown.
BCGE Group Investment Strategy
2nd Quarter 2017
The dollar movements need to be reintegrated into the fundamental context of a currency having to grapple with high outflows of capital to finance the trade deficit needing to be offset
by an equally important financial attractiveness. The nominal and
real interest rates differential, together with the stock market’s
euphoria have been able to justify this dollar bullishness. Nevertheless, to hold up, the surprise effect must not give way to disappointment. Differences in monetary policies are probably insufficient to counter any possible disappointments on the potential
of other asset classes. Consequently, we are sticking with dollar
stabilisation as the most fundamental scenario for 2017-2018.
UNITED STATES
Stock markets
Optimism, but no euphoria
In this early part of the year, American equity indices have been
breaking record after record. There are several reasons for this
continuous appreciation: investors are more and more optimistic about the strength of the American economy. In addition,
the announcements made by the new president in favour of
businesses have helped the revaluation of risk assets. Over and
above these intentions, we should focus on the fundamentals of
companies which remain solid with a return of earnings growth
in the final quarter of 2016 and the improvement in profitability
despite the high levels already achieved. Consequently, American corporates are yet again giving evidence of their robustness.
United States: stock market indices
Rebased on 100 = -5 years
200
180
160
140
120
100
80
12
13
14
15
16
17
S&P 500
Nasdaq
Be wary of the underlying risks
Earnings revisions are more and more homogenous, amplifying
the herding effect of analysts. In this context, volatility is compressed at a historically low level. But let us not forget, when
constructing the portfolio, that 2017 is still a year of political
transition with its opportunities as well as its potential disappointments.
Outlook
Fundamental underlying activity supports ongoing profits
growth at a sustained pace after the halt in 2016. The excessive
valuation levels advocate in favour of a selective choice in the
sectors and the companies being driven by their innovative productive base and their investment in the future, of which there
are many in the US despite the political uncertainties.
United States: stock market fundamental indicators
Price / earnings ratio
Annual percentage change
12
18
17
10
16
8
15
14
6
13
4
12
11
12
13
14
15
16
17
P/E ratio
Expected earnings growth (right scale)
Summary
American activity has rebalanced and can still progress at a moderate pace in 2017-18.
If the presidential intentions in favour of business activity do materialise, this can provide an accelerator for the
growth expected.
The inflation above the 2% mark should not be a problem. The limited of wage pressure means there is only little risk
of inflationary overheating.
In line with its mandate, the Fed will continue the progressive normalisation of its interest rates, with no surprise
impact on inflation or the value of the dollar.
In this context of growth and business productivity efforts, the expansion of profits argues in favour of capital even
though the valuation and the political context may accentuate short-term volatility.
Now that the bond yield adjustments have been made and in the context of growth and moderate inflation,
American bonds offer a more attractive risk/return balance which is worth considering.
BCGE Group Investment Strategy
2nd Quarter 2017
2
17
18
EMERGING REGION
Macro
Pick-up in growth, without inflation
In 2016, growth still painted a very different picture from one
country to another. China and India saw their economy progress significantly, unlike Russia and Brazil whose growth rates
fell back by 0.4% and 2.5% respectively. Overall, activity in the
Emerging region gained more than 4% last year, a result which
could continue in 2017 and 2018 according to the IMF. In this
context, Brazil and Russia should see a return of positive figures.
Brazil: economic growth and exchange rates
Annual change in %
Annual change in %
6
-80
-60
4
-40
2
-20
0
0
20
-2
40
-4
Against a backdrop of the rebound in commodities, the upturn
of activity follows the momentum of industry and world trade.
In this spirit, business leaders’ confidence indices have often followed the bullish trend of the developed world’s leading indicators. At the end of the Communist Party’s Congress in China,
the government reiterated its growth objective of 6.5% which
it will achieve by alternating support for growth and borrowing
restrictions.
60
-6
12
13
14
15
80
16
GDP
Real/USD exchange rate (right scale)
China: consumer price inflation
Annual change in %
As regards inflation, the target for the Chinese authorities has
been set at 3%. Having fallen back to 0.8% recently, the target
is still far from being met, but the drop in inflation is due to the
calendar and a seasonal phenomenon. So, the figure does not
point to a trend, even though inflation remains relatively low as
borne out by the core version which dropped to under 2%. In
Brazil and Russia, inflation has continued to decline, coming out
at less than 5%. Conversely, India saw inflation accelerate, but
it is still under 4%. Overall, and assuming there is no further exchange rate shock, inflation should decrease over the Emerging
region. The expected slowdown should bring the figures closer
to 4.5%.
In this region, growth will continue to rebalance in phase with
each country’s individual sensitivity to commodity prices and to
the world export cycle.
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
12
13
14
2017
2018
GDP %
4.5
4.8
World trade %
3.8
4.1
Inflation %
4.5
4.4
Easing
Neutral
Index
980
1080
EPS
13%
10%
PER
11.9
11.9
MSCI EM
2nd Quarter 2017
16
Macroeconomic data : Emerging region
Monetary policy
BCGE Group Investment Strategy
15
Headline inflation
Underlying inflation (except energy and food)
17
EMERGING REGION
Emerging debt
Renewed confidence, but fragile
Brazil has loosened the reins of its monetary policy on two
occasions since the beginning of the year. The central bank’s
benchmark rate has subsequently lost 150 basis points. Still
above 12%, it bears out the painful historical trend of inflation whose peak had reached more than 10% in 2016. At this
level, the interest rate could drop further if inflation were to
maintain its decline.
Emerging economies: key monetary policy rates
In %
18
16
14
12
10
8
6
In the other major Emerging countries, monetary policy has
essentially remained unchanged. China continues to act in a
targeted fashion on certain economic or financial segments. By
tightening the conditions required to obtain a mortgage loan,
the Chinese authorities have taken new measures to temper
the demand for property assets. To fight against excessive borrowing and the downward pressures on the Chinese currency,
the rates on interbank liquidity have continued to increase.
4
12
Brazil
Russia
13
14
15
16
Indonesia
India
China
South Africa
17
Turkey
Emerging bond markets: sovereign debt
In %
In %
4.5
In this context, indices for Emerging government debt have increased by more than 3% since the beginning of the year and
the corporate debt index has followed the same trend. In this
movement of falling inflation and interest rates, the 10-year
benchmark rate in Brazil has eased by more than 100 basis
points.
While credit premiums have overall tightened compared to the
American benchmark rates on dollar denominated debt, political uncertainties may curb investment inflows. Up until now,
the sharp rebound of emerging assets indicates that the market does not fear the rise in protectionism. But any shift in the
policy, wherever it is on either side of the Atlantic, continues
to constitute a threat to international exchanges and hence, a
risk for certain regions that are still highly dependent on their
exports.
4.0
3.5
3.0
2.5
2.0
12
13
14
15
16
17
Rates differential between sovereign debt and US 10-year Treasury bond
Emerging bond debt: HC vs. LC
In %
In %
16
14
12
10
8
6
4
2
0
12
13
14
15
16
Rates spread, debt in dollars (HC)
Rates with spread US loy rate, debt in local currency (LC)
BCGE Group Investment Strategy
2nd Quarter 2017
17
19
20
EMERGING REGION
Stock markets
Wind in the sails
Emerging countries: stock market indices
The MSCI Emerging Market index ended the quarter with a
performance ahead of the market field worldwide. Within the
Emerging region, Latin American and in particular Brazil, turned
in the most significant increase, helped by a marked improvement in sentiment. India’s performance, with a growth of 7.3%.
However, we should remain prudent regarding financials, because bad loans have increased sharply, by some 8%.
Rebased on 100 = -5 years
250
200
150
100
50
The cyclical sectors, except for energy, have continued to pull
performance up, however, followed this quarter by the defensive sectors. Meanwhile, the foreign investors who have returned to these markets have preferred style diversification.
The defensive sectors are no longer offering any attractive valuations. Among the cyclical sectors, materials have shown an improvement in margins as well as an increase in earnings which
has not been fully taken on board by investors yet.
0
12
13
MSCI Emerging
Shanghai A-share
14
15
MSCI Russia
MSCI Brazil
16
17
MSCI India
Emerging countries: stock market fundamental indicators
Price / earnings ratio
13
Annual percentage change
18
16
12
The Emerging markets experienced capital inflows for the first
time in 2016 in the wake of the record outflows of 2015. The
profitability of the Emerging markets has improved, helped,
amongst other things, by the weakness of their currencies, the
stability of commodity prices and the upturn in the world export
cycle.
Estimated earnings growth for 2017 has been revised up
(+15%). It offers higher growth than the developed countries
with an attractive valuation.
14
11
12
10
10
9
8
8
12
13
14
15
16
P/E MSCI Emerging markets
Expected earnings growth (right scale)
Summary
Growth in the economies is rebalancing and pulling up all Emerging regions. Expansion of activity should
remain firm with Russia and Brazil moving out of recession.
The appreciation of currencies has, more often than not, prompted a drop in inflation in the Emerging world.
Inflation should converge towards more moderate levels in 2017-18.
The decline in inflation will allow for a loosening of the monetary reins, except in China which is anxious to control
the rise in private borrowing.
Against a backdrop of commodities and export activity rebounding, a strong recovery in earnings growth and an
attractive valuation are underpinning equity appreciation.
Emerging debt, having increased sharply in recent years, warrants caution and, depending on the region,
is very sensitive to dollar and US rates movements.
BCGE Group Investment Strategy
2nd Quarter 2017
17
6
COMMODITIES
Oil price development
Commodity: performance index
In dollar
In USD per barrel
6000
140
5000
120
20
100
15
80
10
60
5
40
0
4000
25
3000
2000
1000
-5
20
12
13
14
15
16
17
S&P Commodity Total Return index
Oil: OPEC vs. the United States
Having gained nearly 20% during the autumn, oil prices dipped
at the start of the year. Moving sideways during the first two
months before, they sharply fell below the 50 dollar mark, on the
eve of spring. In summary, prices have fallen by more than 10%
since 1st January.
But the OPEC agreement, representing other major market players, came into force that very day. If the quotas turn out to be
respected, the reduction in OPEC production may help American
producers. With prices coming back to nearly 50 dollars a barrel,
the production of shale oil has obviously become more attractive
in the United States. At these levels, market projections point to
an increase of more than 600,000 barrels by the end of the year.
In other words, the agreement, supported by some producers,
favours those that are not subjected to the constraint of reducing
their quantity, especially the United States. Therefore, a risk of
downward pressure on prices is not to be excluded.
Admittedly, other technical factors may have weighed on oil prices recently, including the recent statistics on stocks of crude in
the US having reached a new all-time record. Another exceptional
fact, futures contracts do not cater for an increase in prices of
the barrel 12 months forward. In short, prices remain fragile and
volatile. OPEC should not accept having to remain tied to quotas
if the Americans accelerate their production. According to an energy information report in the United States, investments in the oil
sector have become scarcer after the cold shower associated with
the slump of barrel prices in recent years. Eventually, the reduction in investments will have implications on meeting demand.
Therefore, there is no doubt about the trend, with a target price
fluctuating around 60 dollars a barrel by 2018.
12
13
14
15
16
17
Brent
Spread Brent - WTI (right scale)
The prices of industrial metals also went up during the first few
months of the year. While prices may have been driven up by
speculation over the initiative to launch major infrastructure projects in the United States, prices could fall back in the absence of
concrete decisions from the American government. With an increase of some 15%, the price of lead may have been buoyed by
the intention to increase arms spending. Meanwhile, as regards
the construction sector, lead will get no great support from the
Chinese government in its attempt to take the heat out of the real
estate market.
The price of copper has increased by more than 7% since 1st
January, meaning that the rise has continued since the sharp rebound initiated last November. For the first time in 6 years, supply
may not be sufficient to satisfy demand this year. The upturn in
prices is due to the fact that stocks have not been reconstituted,
and that investment expenditures have fallen sharply in the wake
of the downward trend that has characterised the copper market
for more than 5 years now. However, the outlook for moderate
world growth means that there will be no sharp upward trend in
commodity prices, including metals.
BCGE Group Investment Strategy
2nd Quarter 2017
21
22
Editorial board
The Strategic Committee
Constantino Cancela
Director,
Head of BCGE Asset Management,
BCGE Group Chief Investment Officer
Valérie Lemaigre
Chief Economist,
Head of Investment Office,
[email protected]
Constantino Cancela, Head of BCGE Asset Management,
Chairman of the Strategic Committee
Chantal Fellay, Head of Investment support,
Secretary of the Strategic Committee
Valérie Lemaigre, Head of Investment Office,
Member of the Strategic Committee
Marc Riou, Head of Institutional Portfolio Management,
Member of the Strategic Committee
Axel Moser, Head of Private Portfolio Management,
Member of the Strategic Committee
Yann Schorderet
Economist,
[email protected]
Pierre Sauvagnat, Head of Financial Markets & Treasury,
Member of the Strategic Committee
Pierre Weiss, Institutional Portfolio Manager,
Member of the Strategic Committee
Amin Khamsi, Private Banking,
Member of the Strategic Committee
Jean-Paul Dellenbach, Senior Vice-President,
Member of the Strategic Committee
Eric Wesse, Chief Executive Officer of BCGE France,
Member of the Strategic Committee
Nicolas Demierre, Head of Global Commodity Finance,
Member of the Strategic Committee
BCGE Group Investment Strategy
2nd Quarter 2017
23
Impressum
Publisher : Banque Cantonale de Genève,
Communication & Investor relations
Quai de l'Ile 17, CP 2251 - 1211 Geneva 2
Tél. : + 41 22 58 211 21 00
Editor : Hélène De Vos Vuadens
Coordination : Grégory Jaquet ([email protected])
Design : Grégoire-Pierre Dufeil
Copies : 600
Printing : NBmedia
Disclaimer
The Investment Strategy of the BCGE Group is established by the
Strategic Committee of the Banque Cantonale de Genève, for the
needs of the BCGE Group. As a rule the investment strategy, as
exposed in this present document, applies to the management
of all the portfolios, entrusted by our customers to the portfolio
managers of the BCGE Group. BCGE Asset Management staffs
support the Strategic Committee by their financial and stock
markets analysis. They write the present document. The information contained in this document is based on reliable data and
statistics; in no way can they commit the liability of BCGE Asset
Management, the Strategic Committee, the Banque Cantonale
de Genève, or the BCGE Group.
Copyright : Any full or partial reproduction of texts, graphics
or illustrations requires the explicit authorization of the editor
Photograpy, Illustrations & Graphic : Wikimedia commons,
Getty Images, Datastream/Thomson Reuters, FMI, BCGE Asset
management
BCGE Group Investment Strategy
2nd Quarter 2017
Banque Cantonale de Genève
Head Office : Quai de l’Ile 17 – CP 2251 – 1211 Geneva 2
Telephone : +41 (0)58 211 21 00
E-mail : [email protected]
www.bcge.ch
Geneva : Quai de l’Ile 17 – CP 2251 – 1211 Geneva 2
Lausanne : Avenue de la Gare 50 – CP 159 – 1001 Lausanne
Zurich :
Lintheschergasse 19 – Postfach 4068 – 8021 Zurich
E-mail : [email protected]
E-mail : [email protected]
www.bcge.ch/privatebanking
www.bcge.ch/assetmanagement
REPRESENTATIVE OFFICES
Dubai :
Sheikh Zayed Road, Park Place – 14th Floor
PO Box 102810 – Dubai – UAE
Hong Kong :Unit 1803 18/F Alexandra House – Chater Road 18
Central – Hong Kong – China
SUBSIDIARY OF THE BCGE
Banque Cantonale de Genève (France) SA
Lyon :
Place Louis-Pradel 20 – France – 69001 Lyon
Annecy :
Avenue Gambetta 46 – France – 74000 Annecy
Paris :
Rue de la Baume 5 – France – 75008 Paris
www.bcgef.fr
Capital Transmission SA
Rue de la Tour de l’Ile 4 – 1204 Geneva
Dimension SA
Rue des Fontenailles 16 – 1007 Lausanne
www.dimension.ch