Market Insights – April 30th

Weekly financial & economic analysis.

Contact us
pasture

Essentials

A sense of optimism has been in the air since the meeting between the leaders of North and South Korea. The previously glacial relations between the two countries seem to be thawing. The big question now is whether their words can be turned into deeds. The road to peace will no doubt be long and bumpy, which is why Asian markets posted only timid gains last week.

Mr Draghi offered reassuring comments on the economy and inflation at last week’s European Central Bank meeting. Unsurprisingly, the financial markets’ response was muted, with yields dropping slightly and the US dollar continuing to rise against the euro.

Japanese inflation is still desperately short of the target set by the Bank of Japan (BoJ). The Tokyo Consumer Price Index has put in a disappointing performance for several months now, with the rise in prices dropping from 1.4% at the start of the year to 0.5% more recently. With these figures, the BoJ is unlikely to make any changes to its monetary policy.

All eyes are still on US yields

The geopolitical risks that have held investors’ attention in recent weeks are starting to fade. Tensions have eased both on the Korean peninsula and in the Middle East, as has talk of a trade war between the USA and China. Investors are instead starting to worry about inflation again, especially in the USA, which is reaching full employment after close to ten years of uninterrupted economic growth. Economists are afraid that if inflation outpaces expectations, the Federal Reserve will have no choice but to speed up its monetary policy tightening, which could bring an end to one of the longest macro
cycles in modern history. Yet indicators still suggest that inflation is increasing very gradually in the USA and is unlikely to spin out of control. This was confirmed by the much-awaited Q1 figures released last week. The Fed keeps a close eye on the deflators used by the US Commerce Department, particularly the Personal Consumption Expenditures (PCE) deflator. While the Q1 figure came in close to the 2% target set by the Fed, the feared surge has not materialised. These data have helped to calm the US bond market. Ten-year yields fell after briefly crossing the psychological threshold of 3%. Most other bond markets around the world
then followed suit, led by those in Europe, where initial April inflation estimates confirmed the absence of any real uptick in inflation. The assets and currencies of the main emerging markets, which have underperformed recently, also settled down. We still don’t think US long-term interest rates will rise much above 3% given the current inflation environment. But risk assets should be able to absorb a further rebound in US interest rates as long as it is slow and gradual

USA: fundamentals still strong

Only half of S&P 500 companies have so far released their earnings figures, but Q1 2018 is already shaping up to be a very good quarter. For starters, earnings growth picked up considerably during the first three months of the year. Analysts expect earnings to rise by more than 22% year on year, despite the tough basis for comparison – at 14%, growth was already strong in Q1 2017. Secondly, 80% of
companies that have so far released their results managed to beat analysts’ already ambitious forecasts.

The recent US tax reform is largely to thank for this improvement. But it is by no means the only factor – these results can also be put down to the buoyant global economic climate. Corporate top-line growth came in at 7.5%, driven by the tech sector (+14%) and very cyclical sectors like energy, materials and indus-
trials.

At the same time, many economic indicators have reassured investors – the US economy’s fundamentals are still strong. However, the market reacted coolly to these results, which could well mark a high point for US earnings growth  before things gradually return to normal. That is, unless US companies once again defy economists’ expectations.

To go deeper

Legal

Ce site contient des informations relatives à un grand nombre de fonds de placement enregistrés et gérés dans différentes juridictions. Les informations de ce site web ne sont pas destinées aux personnes relevant de juridictions dans lesquelles (en raison de la nationalité des personnes, de leur lieu de résidence ou pour toute autre raison) la diffusion ou l’accès à ce site est interdit. Les personnes soumises à de telles restrictions locales ne doivent pas accéder à ce site web.
Les informations publiées sur ce site ne constituent ni une sollicitation ni une offre, ni une recommandation d’achat ou vente ou de toute autre transaction sur des instruments de placement.

Même si ce site reprend une large sélection de fonds à disposition, il n’englobe pas tous les fonds actuellement disponibles sur le marché. Dès lors, il peut exister des fonds correspondant mieux aux besoins de placement de l’utilisateur, mais qui ne figurent pas sur ce site. L’utilisateur doit être conscient du fait que les prix des parts de fonds de placement peuvent fluctuer vers le haut et vers le bas. En conséquence, la performance passée n’est pas une garantie de la performance future. Par ailleurs, les placements en devises différentes sont sujets aux fluctuations des taux de change.
Avant d’effectuer tout investissement dans un placement collectif, l’utilisateur doit lire impérativement et attentivement les prospectus de vente et les informations clés pour l'investisseur (KIID). Les prospectus et KIIDs des fonds sur ce site sont disponibles sur ce site, mais peuvent également être demandés gratuitement, auprès de Piguet Galland & Cie SA ou de la direction de fonds. L’utilisateur s’engage à lire les clauses de non-responsabilité relative à chaque fonds avant d’effectuer un placement.

Les membres du conseil d’administration ou les collaborateurs de Piguet Galland & Cie SA peuvent détenir ou avoir détenu des participations ou des positions dans les fonds considérés ou peuvent être actifs ou avoir été actifs en tant que teneurs de marché pour ces titres. Par ailleurs, les membres du conseil d’administration ou les collaborateurs de Piguet Galland & Cie SA peuvent entretenir ou avoir entretenu des relations avec les sociétés concernées, peuvent offrir ou avoir offert des services de financement d’entreprise ou autres à ces sociétés ou peuvent siéger ou avoir siégé dans leur comité directeur.
Veuillez préalablement prendre connaissance des Conditions d'Utilisation du Site.

Maecenas consequat purus orci, nec bibendum massa lobortis imperdiet. Vestibulum vel urna efficitur, hendrerit felis sed, interdum enim. Aenean aliquet urna libero, eu posuere arcu volutpat eu. Pellentesque ut metus imperdiet, consequat velit sed, egestas augue. Interdum et malesuada fames ac ante ipsum primis in faucibus. Praesent convallis neque vitae tempor volutpat. Maecenas scelerisque semper dolor id cursus. In vitae justo in eros ornare hendrerit et id tellus. Suspendisse posuere nisl non consectetur consequat. Morbi egestas nunc et nisl dapibus, a consectetur lacus lacinia. Etiam feugiat ante eget luctus varius. Curabitur rutrum, velit eget molestie molestie, ipsum arcu ornare tortor, faucibus congue arcu est eu risus. Sed ut tellus dui. Phasellus feugiat quis ligula eu pretium.

Personal informations
Nos services n'étant disponibles qu'aux résidents suisses, le choix du pays de domicile n'est pas disponible.
You must accept the terms of use.
* required fields