Market Compass
February 2019

Edited by the Macro & Market Research Team.
The 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.

Highlights:

  • Disappointing macro data and political uncertainties (trade war, Brexit, US government shutdown) offered little support to global markets into the new year.
  • Yet risky assets have rebounded from a panic sell-off in December. More dovish central banks, Chinese policy support and hopes of a US/China trade deal are reassuring investors that policy makers will address downside risks.
  • We subscribe to Fed’s Powell underlying message: patience is a virtue. Equity prices, while stronger, still reflect a too gloomy outlook, in our view. Core yields are very low and there is scope for a moderate rise.
  • We trim but retain a pro-risk allocation tilt, slightly reducing our underweight in govies and keeping an overweight in credit.
MARKET COMPASS FEBRUARY 2019

RELATED INSIGHTS

US INFLATION: RISING, NOT SOARING
Since the beginning of the year financial markets have started increasingly to worry about a sudden and strong re-turn of US inflation. Behind this stands the double boost from domestic demand coming from the widely expected re-opening of the economy in spring and the large fiscal stim-ulus the incoming Democratic administration will most likely deliver.
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.