Financial markets dialogue for the second quarter

Worldwide economic growth forecasts are gloomy. In January, the International Monetary Fund revised 2019 growth forecasts down to 3.5%.

The slowdown is happening at two different speeds: Europe and China are suffering while the United States remains the driver of global growth.

In Europe, Germany’s automotive industry and exports are affected but the country remains very well placed to withstand the headwinds. Its employment market is in good health and its public finances are sound. In Italy, political uncertainty has led to a lack of visibility, resulting in a fall in consumption and private investment.

In China, the economy is slowing down, but this must be viewed in relative terms: the government is forecasting growth of 6 to 6.5% for 2019, at a time when the Chinese authorities are transitioning towards a service economy, and is doing whatever it can to stimulate demand in areas where it is weak

In the United States, the economy is proving to be exceptionally resilient. While the government shutdown and the trade tensions have clearly had an adverse effect on economic data, the country nevertheless has significant strengths which allow it to remain resolutely optimistic.

In the area of equity investments, the markets in developed and emerging countries recovered spectacularly after the holiday season. The conciliatory language used by the Fed, progress in the trade negotiations between the United States and China, the end of the government shutdown and the publication of good results reassured investors.

As such, we have opted for a more defensive positioning by reducing our exposure to equities, since the current environment is less favourable than in 2018. There were some exceptional performances that led to us taking profits at a time when we expected increased volatility, which reached a very low level despite the tensions in the political world.