MARKET COMPASS
NOVEMBER 2019

Edited by the Macro & Market Research Team.
A team of 13 analysts based in Paris, Cologne, Trieste, Milan and Prague runs qualitative and quantitative analysis on macroeconomic and financial issues.

The team translates macro and quant views into investment ideas that feed into the investment process.

  • Investors entered autumn with great anxiety about the trade war and Brexit. Those risks have abated, and so have flight-to-quality flows.
  • Headline risk into yearend includes trade war news (US, China, EU) and US employment data. Yet we don’t see those derailing market trends.
  • The USD is pulling back from the end-September peak, historically a weaker dollar has meant lower risk adversion in both the US and Emerging Markets.
  • Equities continue to offer attractive earnings yields relative to bonds; it is hard to resist the appeal, unless one fears a 2008- or 2011-like scenario.
MARKET COMPASS NOVEMBER 2019

RELATED INSIGHTS

CHINA’S Q4 GDP GROWTH SURPRISED ON THE UPSIDE, BUT RISKS TO THE OUTLOOK HAVE INCREASED
This morning, China published its Q4 GDP growth alongside with December monthly activity data. Q4 growth accelerated to 6.5% yoy which lifted total 2020 GDP to 2.3%. December real activity data were more mixed. While exports came in strongly, important domestic demand components were a bit unsteady.
COVID-19 FACTS & FIGURES
US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.
EQUITIES: STAY POSITIVE WITH A VALUE-CYCLICAL TILT
Following a monster rally in stocks last autumn, multiples are well above historical averages, but equity investors can count on lingering low yields, tighter credit spreads and increasing central banks’ balance sheets which in turn maintain low the cost of equity and the discount rate of future cash flows.