The IMF improved its global growth forecasts with a more widespread, synchronised outlook for developed and emerging economies. It also highlighted that risks are broadly balanced in the short term and skewed to the downside in the medium term.
The Fed, which kept interest rates in the 1.25%-1.50% range, pointed to the country’s current economic strength, low unemployment rate and the struggle to approach its 2% inflation target, which it expects to reach in the medium term. However, a rate hike to the 1.50-1.75% range still looks likely to take place in March, at Jerome Powell’s first meeting as Chairman. There were no major changes at the European Central Bank meeting, either: interest rates were kept steady at 0% and asset purchases will continue until at least September. This confirms that the ECB is not planning to step up the pace of tapering and that official rates will remain low for a long time, with a view to bringing year-on-year inflation sustainably closer to the 2% target.
The steady rhythm of rate hikes in the US coupled with a higher inflation outlook weighed on global sovereign fixed income indices. The exception to this rule was Spain, after Fitch upgraded its sovereign debt rating to A- with a stable outlook. The credit market put in an uneven performance: high-yield did well, whilst investment grade saw moderate losses.
Earnings season has been positive and better than expected; almost 50% of the S&P 500 companies have already posted results with average EPS growth of 12% and revenue growth of 8%. The ratio of companies posting better-than-expected results stands at 81%, which is the highest figure in seven years. In Europe, earnings growth stands at almost 15%, and revenue growth at 7%.
Global stock markets did extremely well in January, with an outstanding performance by emerging market equities and a buoyant US market thanks to the tax reform and the strong earnings season. European markets – spearheaded by the IBEX 35 – also registered positive results thanks to the robust economic data and despite the strong euro, which rose to 1.24 $/€ in January. In terms of currency crosses, the strong macro figures in the eurozone and the deal in principle reached by the German government had a clearly greater impact than the expected rate hikes and the tax reform in the US.
March International – March Vini Catena
In January, the March International – March Vini Catena A EUR fund returned +0.57%, compared with +3.70% for the MSCI World LC.
The most heavily-weighted sectors in the portfolio are distilled spirits, wines, distribution and industrial machinery. By country, the fund’s investments are focused on France, the US and the UK. The stock that contributed the most over the month was Stock Spirits Group, followed by Viña Concha y Toro and Treasury Wine Estates, while Crimsom Wine Group, Diageo and Remy Cointreau were the names that contributed the least to the portfolio’s performance.
We opened a position in Thai Beverage, an Asian leader in the Thai spirits and beer market, which is currently expanding its business through acquisitions of competitors in neighbouring countries. The rest of the portfolio remained relatively stable throughout the month.
March International – The Family Businesses Fund
In January, the March International – The Family Businesses Fund A EUR returned +1.60%, compared with +3.70% for the MSCI World LC.
The most heavily-weighted sectors in the portfolio are consumer discretionary, consumer staples and industrials. By country, the fund’s investments are focused on the US, Switzerland and Germany. The stock that contributed the most over the month was Sonae, followed by eDreams and Helmerich & Pain, while Remy Cointreau, Samsung Electronics and Roche Hldg were the names that contributed the least to the portfolio’s performance.
We kept the portfolio stable, shoring up positions where performances have lagged slightly.
March International – Valores Iberian Equity
In January, the March International – Valores Iberian Equity A EUR fund returned +3.16%, compared with +4.06% for the Ibex 35.
The most heavily-weighted sectors in the portfolio are consumer discretionary, industrials and financials. We kept exposure to Portugal at 18.1% stable. The stock that contributed the most over the month was Bankinter, followed by eDreams and Sonae, while Red Eléctrica, Gas Natural and Ferrovial were the names that contributed the least to the portfolio’s performance.
The strong performance of the markets buoyed NH Hoteles and Amadeus to within the region of our target prices, so we sold both positions. We also took profits in Ferrovial, Siemens Gamesa and Prosegur, following the recent outperformance of all three, in order to adjust exposure to our conviction levels. In the banking sector, we rotated names to maintain exposure by selling our position in Bankinter and raising our investment in Bankia. We also increased our conviction in CTT Correios de Portugal, which now accounts for 3.75% of the portfolio.
March International – Torrenova Lux
In January, the March International – Torrenova Lux A EUR fund returned +0.17%.
Equity exposure remains at levels slightly above neutral at around 21.5%.
The continued strong performance of the markets in January led us to pare back positions in names that have registered significant gains to hold equity exposure at the same level as last month. We also took the opportunity to sell our position in Novo Nordisk, following the stock’s excellent performance since it was included in the portfolio last April. We sold BHP Billiton, as it is currently trading at ambitious valuations and the investment thesis for the stock no longer applies, given the change of strategy to be implemented by the current management team. We increased our position in Sanofi, which is trading at attractive levels and has a strong product portfolio, to maintain exposure to the healthcare sector. We also upped our investment in General Electric slightly.
In fixed income, we left our positioning unchanged versus last year, focusing on compelling investment opportunities offering positive yields. We continue to like floating rate notes, commercial paper and peripheral sovereign debt from Italy, Spain and Portugal. Duration was kept moderate at around 1 year with a yield of 0.49%, a slight month-on-month improvement.
This document is for information purposes only.
The legal documents for the fund(s) referred to herein is available at www.cnmv.es<http://www.cnmv.es>, www.march-am.com<http://www.march-am.com> and www.bancamarch.es<http://www.bancamarch.es>.
Clients or prospective investors should bear in mind that this document does not constitute an investment recommendation by either March Asset Management, S.G.I.I.C., S.A.U. or Banca March, S.A. Clients or prospective investors should base their investment decisions on external tax, legal, financial, regulatory, accounting advice, or any other form of counsel, as appropriate.
Neither March Asset Management, S.G.I.I.C., S.AU. nor Banca March, S.A. take responsibility for any direct or indirect costs or losses resulting from the use of this document or any actions undertaken based on its content.
The client or prospective investor should be aware that past performance is not a reliable indicator of future results and that the risks related to the fund(s) referred to herein are outlined in the legal documents available on the websites indicated above.
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