April 2019

April was a very good month for the financial markets with the European Stoxx 600 gaining 3.3% and the US S&P index up 3.9% (+16% and +17.5%, respectively, since the beginning of the year). This spectacular rebound was fuelled by mild interest rates, which fail to pick up, or, as seemed to be the case in the US market, may even be expected to fall. This calls for greater vigilance towards economic fundamentals, and only reinforces the pertinence of the gleanings provided by first-quarter earnings reports.

Consumption continues to drive growth. Thanks to comfortable demand, Givaudan reported 5.1% growth in the developed economies and 8% growth in the emerging economies, which includes market share gains, of course. L'Oreal estimates that its markets grew 5.5%, with e-commerce up 20% in its business lines. Discretionary spending on luxury goods continues to grow as well, albeit at a slightly slower pace. The Federation of the Swiss watch industry reported first-quarter sales growth of 3.4% compared to the year-earlier period, including +1.4% in Hong-Kong and China.

In contrast, global industrial activity, as reflected in the demand for chemical products, provides a more mixed picture. BASF noted that many of its customers were adopting a wait-and-see approach, with growth in volume ranging from a negative 5% to a positive 2% depending on the sector. Shipments to the German automobile industry were down 13%. Even so, the group did not downgrade its macroeconomic scenario for the year (world GDP growth of 2.8%, including 2.7% for the industry). Looking more specifically at investment, Schneider Electric reported a mixed performance, with Energy Efficiency nearing a cyclical peak (+7.4% after +5.2% in Q1 2018 and +2.5% in Q1 2017), while industrial automation already seems to have peaked (+4% after +9.2% in Q1 2018 and +5.3% in Q1 2017).

Lastly, Kuehne & Nagel reported a downturn in cargo volumes, with maritime freight to Asia down 2% to 3%, and air freight as a whole down 2% to 3% as well, although the company esteems that it is still too early to jump to any conclusions.

The year's first earnings reports confirm an environment of slower economic growth, albeit without recession. Major sector disparities warrant greater selectivity. So far the markets have proven to be especially sensitive to macroeconomic factors and interest rates.

The equity compartments of Rouvier funds have made the most of market growth this year, with Rouvier Europe and Rouvier Valeurs up 17.4% and 15.3%, respectively, while Rouvier Evolution, the hedged version of Rouvier Valeurs, gained 10.4% and Rouvier Patrimoine rose 3.1%.



Monthly Factsheet