Download Investment Report

May 2017.
Investment Report
Strategy overview
been priced in, prompted us to build up a posi-
Following the first round of voting in France, po-
tion in selected European banks. We imple-
litical imponderables have taken a back seat. En
mented the position in client portfolios before
Marche – equity markets celebrated Emmanuel
the elections in France, which promptly led to
Macron’s first-round victory with a veritable re-
phenomenal price gains. On account of the
bound in prices. In the interim, the most im-
above-described transaction, the equity ratio is
portant stockmarket indices have gained be-
currently slightly overweighted. In regional
tween 1.5% (USA) and 6% (France). The sense of
terms, we are continuing to favour Europe, as
relief also manifested itself in the rise in the
the broad economic recovery points to an im-
euro, declining risk premiums on government
provement in profits. As a consequence, the val-
bonds and a rise in prices on European equity
uation discount is likely to decline vis-à-vis the
markets. Macron is widely expected to win the
United States.
second and decisive round of voting on 7 May to
As we are not expecting the French election to
become the new French president.
produce a negative surprise, i.e. an election vic-
On the other side of the Atlantic, the Trump ad-
tory on the part of Marine Le Pen, and because
ministration marked 100 days in office by an-
the US equity market – notwithstanding nega-
nouncing the broad outlines of its planned tax
tive headlines, particularly those of a geopolitical
reform. Finance minister Steven Mnuchin under-
nature – is proving to be extremely resilient, we
scored the plans, which are set to cut corpora-
have abandoned a part of our hedging. Despite
tion tax from 35% to 15%. In addition, a territorial
this, a substantial number of political hotspots
system will be introduced – profits parked
remain. The US rocket attack on a military air-
abroad by US corporations are to be subjected
field in Syria, the dropping of a huge bomb
to a one-off and competitive fiscal levy. A US
“Moab” in Afghanistan by US forces, the sabre-
Congress committee estimates that the total
rattling associated with North Koreas controver-
sum of money being kept abroad amounts to
sial atomic weapon programme and the deterio-
USD 2,600 billion. There was no mention of the
ration in relations between the USA and Russia,
idea of a cash-flow tax, with a tax charge on im-
just to mention a few. For this reason we have
ports and the tax-deductibility of exports. At the
not completely discontinued the hedging, and
end of the day, the US Congress will need to de-
are leaving the partial hedging in place for the
cide on the tax reform, which will take time and
present as protection against the above-men-
require intensive negotiations. The aim is to get
tioned risks.
the reform approved by the autumn. In our view,
the timeframe is extremely ambitious, not least
because it is still not clear how the tax cuts are
Economy
going to be financed.
Economic indicators have been slightly disap-
Ahead of the election in France, European banks
pointing of late, particularly in the USA, as the
took another hit. Valuations – book value of ap-
following chart shows. For us, this prompts the
prox. 0.7x – as well as the fact that a considera-
question of whether US economic growth is be-
ble amount of negative news-flows had already
ing overestimated.
FACTUM AG
Vermögensverwaltung
1|5
Investment Report.
There has been some positive news coming out
of the Middle Kingdom. Gross domestic product
came in slightly ahead of expectations with a
growth rate of 6.9% in the first quarter. This is
the strongest growth recorded since the third
quarter of 2015. In Brazil the central bank
trimmed its base rate from 12.25% to 11.25%.
This was the fifth rate cut since last September,
and was the sharpest reduction since 2009. Declining inflation and the stable performance of
Source: Bloomberg
the Brazilian currency made the interest rate
moves possible, not least because Brazil is still in
The US economy grew at an annualised rate of
a recession. Further base rate cuts may be ex-
0.7% during the first three months of the year. It
pected over the coming months.
is our assumption that the first quarter was
merely an anomaly. Seasonal factors also played
a major role. We are expecting overall economic
Equity markets
growth to be significantly higher in the second
Vive la France! In the wake of Emmanuel Mac-
quarter. The unemployment rate in the USA has
ron’s first-round victory, stock exchanges, par-
fallen from 4.8% at the start of the year to 4.5%
ticularly in the Old World, have been posting
today, which is the lowest it has been for ten
substantial rises. In particular, previously hard-
years.
hit financial stocks recorded massive gains –
At the end of April the British Prime Minister
some French, Italian and German banks rec-
Theresa May took many people by surprise by
orded double-digit gains on the first day of trad-
announcing new elections. The general election
ing following the initial round of the election.
is set to take place on 8 June. The next general
Professional investors, according to an invest-
election would normally have been held only in
ment fund manager survey conducted by the
the year 2020. Insofar as the Conservatives (To-
Bank of America Merrill Lynch, also implemented
ries) secure an election victory in June, which
massive regrouping of European securities
opinion polls suggest is the likely outcome, then
ahead of the first round of voting. According to
this would be seen as a clear mandate for
statistics, this was the fifth-strongest monthly
“Brexit” and would greatly strengthen May’s
rotation recorded since 1999. Another reason for
hand and consequently her negotiating position
the recent price rally in Europe was that Macron
relative to the EU. In Turkey, President Recep
is an outspoken supporter of the euro, and to-
Tayyip Erdogan narrowly won the national con-
gether with Germany could bring the single cur-
stitutional referendum. It will be interesting to
rency forward politically. We are delighted with
see how the situation in Turkey as well as dia-
the recent price performance in Europe, as we
logue with the EU develops over the months and
are overweighted in European stocks. At the
years ahead.
same time, however, we remain wary and are
FACTUM AG
Vermögensverwaltung
2|5
Investment Report.
not naïve, as Italy is still the problem child. It will
Commodities
have to hold elections at the latest in the spring
Gold has managed to regain some of its shine in
of 2018, and anti-euro sentiment has begun to
recent months. In April the yellow metal gained
gather majority support. The fact that the stock
around 1.5% in value. Since the start of the year
prices of 400 of the 500 companies listed in the
the return has been 10.5%. This has seen the
S&P 500 have hit all-time highs is another reason
price of gold rise to the highest level since the
to exercise caution. In addition, the Dow Jones
US presidential election. In our view, demand for
reached new records on eleven consecutive
safe investment classes is due to the current po-
days in February. Such a performance had not
litical environment as well as the geopolitical
been seen since 1987. Despite these facts, we
risks that we mentioned in the introduction. In
are sticking to our moderate overweighting of
particular, the geopolitical imponderables are
equities, as favourable economic prospects and
not likely to simply fade away in the near future,
rising corporate earnings mean there is still
and for this reason we are not making any
scope for higher prices.
changes to our gold positioning.
Bond markets
Currencies
Assuming the global economy grows synchroni-
The greenback has been showing weak tenden-
cally and that the momentum of growth also re-
cies since the start of the year. This is remarka-
mains consistently high, there is no reason why
ble, in view of the speculation surrounding base
fixed-interest investments should become more
rate hikes for the US dollar. In 2017 the US dollar
popular amongst investors. We are of the opin-
lost around 3.6% against the euro and 2.4%
ion that the oft-cited political risks ar no good
against the Swiss franc. Macron’s strong show-
reason to keep yields depressed. Growth is
ing in the first round of voting certainly helped
proving robust, and not even President Trump is
strengthen the euro. At the end of April the euro
free to govern as he wishes in a presidential sys-
rose to its highest level in five months against
tem. For thes reasons, we are confident that Eu-
the USD, at 1.0930. The single currency also rose
rope is not likely to experience any major long-
to CHF 1.0856 against the Swiss franc – the
term turmoil, notwithstanding the various politi-
highest figure since December 2016. In view of
cal imponderables. For these and other reasons
the burgeoning growth optimism and waning
we have been underweighted in bonds for a
concerns about political radicalism in Europe, in-
considerable period of time, and favour shorther
vestors are also asking themselves when the Eu-
maturities. Bonds remain unattractive because
ropean Central Bank is likely to start publicly de-
yields are far too low. We see opportunities for
bating the end of its extreme monetary policy
inflation-linked or high-interest bonds. The latter
strategy. If the ECB does make such changes,
are benefitting from the improving economic en-
then the dollar might lose its interest advantage.
vironment.
For this reason it cannot entirely be ruled out
that the value of the euro could post further
FACTUM AG
Vermögensverwaltung
3|5
Investment Report.
gains in the months ahead. This would be an environment in which the Swiss franc could
weaken against the euro, thereby enabling the
Swiss National Bank to reduce its interventions
or even to start restoring its balance sheet.
Market overview 28.04.2017
1 Mt (%)
YtD (%)
SMI
8‘812.67
2.94
10.13
Euro Stoxx 50
3’559.59
2.05
9.15
20’940.51
1.45
6.71
2’384.20
1.03
7.16
19’196.74
1.52
1.20
1’268.28
1.53
10.53
49.33
-2.51
-8.17
USD 10 years
2.28
-0.11
-0.16
CHF 10 years
-0.11
-0.02
0.07
EUR 10 years
0.32
-0.01
0.11
EUR/CHF
1.08
1.43
1.13
USD/CHF
0.99
-0.80
-2.39
EUR/USD
1.09
2.28
3.59
GBP/CHF
1.29
2.34
2.38
JPY/CHF
JPY/USD
0.89
-0.91
2.45
0.01
-0.12
4.90
Dow Jones
S&P 500
Nikkei 225
Gold (USD/fine ounce)
WTI oil (USD/barrel)
FACTUM AG
Vermögensverwaltung
4|5
Disclaimer.
We will be gladly available to you to answer any questions.
The value of financial instruments may rise or fall. Future performance cannot be deduced from the past development of prices.
Factum AG Vermögensveraltung is a licensed, independent asset
management company that is subject to the Liechtenstein Financial Market Authority.
It is the exclusive purpose of this publication to inform; it is neither a request nor an offer nor a recommendation to purchase or
sell financial instruments or to take any other decisions on investments. It is therefore not a financial analysis in terms of the
Under particular market-related or title-specific circumstances, financial instruments can be sold only with delay and the risks that
it is subject to.
We would like to point out that Factum AG Vermögensverwaltung
and its employees are allowed in principle to hold, purchase, or
sell the financial instruments mentioned in this document, without
however putting clients at any disadvantage whatsoever.
Marktmissbrauchsgesetz (Act on Market Misuse), either.
This publication and the information contained in it are subject to
The information and opinions contained in this publication originate from reliable sources and have been prepared with the ut-
Liechtenstein law. In the event of any disputes, jurisdiction rests
most diligence. Nevertheless, we exclude any liability for accuracy,
exclusively with the Liechtenstein courts at the legal venue of Va-
completeness and topicality. All information contained and all
duz
prices stated in this publication may change at any time without
notice.
FACTUM AG
Vermögensverwaltung
5|5