In June, equity markets in developed countries continued to perform strongly, posting gains of almost 5% in EUR. The US markets were the driving force behind this increase, with nearly 6% of performance at the end of the month vs. just 1,5% in Europe. This difference in geographical performance is also reflected in sector performances. The technology sector recovered significantly (+10,6%) after having lagged somewhat since the beginning of 2021 compared to more cyclical sectors such as energy and financials.
It is worth noting that cyclical sectors have benefited greatly from the exit from recession and from an economic recovery whichhas received a substantial boost from industrial production.
Currently, the success of the vaccination campaigns and the reopening of the services sector (the principal growth driver in developed countries during the pre-Covid period) suggest that consumption habits and the economy are beginning to return to normal. The strong cyclicality observed since the start of the year seems to be dissipating.
Even though it is difficult to be certain that we will see a sector rotation from value to growth for the moment, market movements and economic indicators are pointing in that direction.
Rates on bond markets also back up this argument. The upward movement on long-term rates that began in August 2020 has been on hold since March. By way of example, the 10-year US bond yield dropped from 1,74% at the end of March to 1,46% by the end of June. This environment of low yields makes growth sectors, such as technology, more attractive.
In summary, market movements show that investors continue to believe that current inflation levels will be temporary, as the US Federal Reserve (Fed) and the European Central Bank (ECB) insist. The downturn in long-term rates and the good short-term performance of growth stocks are evidence that markets are aligning with the view of central banks.
To sum things up, our overall allocation choice remains unchanged: we continue to prefer equities to bonds. However, we are making a few adjustments to our tactical positioning: we are reducing our exposure to cyclical sectors in order to bring a growth bias to our portfolios. In addition to the macroeconomic and associated interest rate environment, the outperformance of growth relative to value sectors is well-established.
Car vous privilégiez la relation avec un Conseiller Private Banking spécialisé dans les fonds d'investissements et ETFs.
Déléguez la gestion de vos avoirs à une équipe de spécialistes à votre écoute et profitez de leur expertise.
The information and opinions contained in this document have been taken from reliable sources. The Banque et Caisse d'Epargne de l'Etat, Luxembourg (Spuerkeess) cannot, however, guarantee their accuracy, comprehen-siveness or relevance. The information and opinions contained in this document have been provided to Spuerkeess’s clients purely for information purposes and should not be construed as an offer of purchase or sale, investment recommendations or advice, or any commitment from Spuerkeess.
Clients must form their own opinion about the information contained in this docu-ment and, to help them to do so, they are free to contact their usual advisers if they have any investment-related questions.
The information and opinions should under no circumstances be used as a basis for evaluating any financial instruments referred to in this document. Any reference to past performances should not be construed as an indication of future performances.
The contents of this document reflect Spuerkeess’s opinions on the date of its publica-tion. Any information or opinions contained in this document may be removed or amended at any time by a new publication.
Spuerkeess does not any accept any liability in respect of this document if it has been altered, distorted or falsified, particularly through online use. Nor can Spuerkeess be held liable for any consequences that may result from the use of any of the opinions or information contained in this document.
As a Luxembourg credit institution, Spuerkeess is subject to the prudential supervision of the Commission de Surveillance du Secteur Financier (the Luxembourg financial supervisory authority).
This document was produced by the Private Banking Unit and BCEE Asset Management. The drafting of this document was completed on 12 May 2021 at 2:00 pm.
This document may not be reproduced or shared with third parties without the prior written consent of Spuerkeess. Unless otherwise indicated in this document, there are no plans to update it.