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Taking into account recent events, please find below a summary of the views of some of our investment entities.

 

BLI- Banque de Luxembourg Investments

Latest news and financial market analysis - 21 march 2022


By Guy Wagner, chief investment officer, and the BLI fund management team.
Deterioration of the economic environment. Unless the situation escalates the impact of the war in Ukraine on the global economy is mainly through the rise in commodity prices. This increase, primarily in the cost of energy, is adding to inflationary pressures and is likely to keep inflation higher for longer

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Markets and Management – Crédit Mutuel Asset Management (as of March 16 - unchanged as of March 24)


Worries about the economic recovery, the actions of the central banks and now the conflict between Russia and Ukraine are crystallizing in a general fall in the markets, experienced by practically all the stock markets in the developed countries since the beginning of the year, and more particularly in the last few days.

Outlook

Since the Fed's aggressive move, and that of other major central banks, visibility on the medium term outlook has become blurred, investors have been jittery and equity and bond markets have become highly volatile.

Management has taken more prudent positions: - underweight in the equity category,
- maintaining the overall underweight for yields, with a preference for inflation linked bonds in the euro area.

In summary, since 15 February, the portfolios of CM AM funds have been adjusted, particularly in anticipation of the deterioration of the geopolitical context.

  • Equities
    Maintain the underweight position implemented on 15 February. More distrust of the eurozone, which is most exposed to the consequences of the conflict, and also of the other regions that will also be affected by the conflict and are looking for defensive assets.
  • Bonds
    In the sovereign category, euro zone sovereign bonds are becoming attractive again and moving from underweight to neutral, whereas in view of its dilemma (supporting Russia or the US) we are reducing Chinese bonds to neutral.
    We are maintaining an overweight position in eurozone inflation indexed bonds and are upgrading to US inflation indexed bonds.
    Corporate Bonds: We are cautious on investment grade bonds, which remain underweight.
    We shift from overweight to neutral the euro zone high yield asset class, as the conflict in Ukraine has had a negative impact. We maintain our neutral position on US high yield.
    We also maintain a neutral position on convertible bonds.
  • Currencies
    Maintenance of the strengthening of the yen in the portfolios because of its safe haven status, to which we add the dollar, which is supported by the tightening of monetary policy and which remains at a distance from the conflict between Russia and Ukraine.
  • Commodities
    The crisis, along with negative real interest rates in the US, has restored its role as a safe haven Gold. We are slightly overweight in portfolios.

 

Macroeconomics – CIC Market Solutions

On the eve of the European Council, Vladimir Putin demanded payment of natural gas in ruble for the Western countries, a measure that could also concern other exports according to the Kremlin soon. This announcement pushed the price of a barrel above $120, the European gas price around €110/MWH and revived the concerns of the financial markets, which posted a drop this morning.

This requirement penalizes purchasing countries and supports the Russian currency, which appreciated significantly yesterday, even though this rise remains minor compared to its collapse since the beginning of the conflict.

The day will be busy with the arrival of Joe Biden to Europe for the NATO, G7 and European Union summits. Discussions will focus on a common response to mounting Russian attacks in Ukraine, although Europe remains hostile to Russian energy sanctions for which it is heavily dependent. Germany wants to take the time to find solutions to reduce its dependence and therefore the impact on the economy.

Europe's release of provisional PMIs gave an initial indication of the economic impact of the war in Ukraine. However, the drop in indicators is still modest at this stage, while some of the economic consequences (supply and inflation of costs and loss of purchasing power for households) will gradually materialize in the coming months.

In this context market volatility remains high.

Text completed on 24 March 2022 at 11:00

This document has been produced for information purposes only. It does not constitute investment advice. Crédit Mutuel Investment Managers cannot be held liable for any decision taken or not taken on the basis of information contained in this document or for any use that may be made by a third party. This document may not be reproduced in whole or in part without the prior written authorisation of Crédit Mutuel Investment Managers. The information contained herein has been drawn from the best sources, but this precaution does not exclude that risks of error have crept into the figures indicated or the facts that this letter refers to.

This document has been produced with the support of the teams from CIC Market Solutions and Crédit Mutuel Asset Management and BLI-Banque de Luxembourg Investments. .

For professional use only