The main equity markets rose in July with the US S&P 500 up 3.6% and the European Stoxx 600 up 3.07%. Riveted to the ongoing Trump saga, the markets seem to be ignoring the potentially recessionary impact of contracting world trade and the inflationary pressures generated by higher import prices and the fiscal deficit. Instead they seem to be focusing solely on the impact of fiscal measures on earnings growth. We must admit however that they seem to be right based on the main conclusions drawn from half-year earnings reports.
As to world trade, Kuehne & Nagel reported a robust maritime freight business, with volumes up 4% in the second quarter, after a 2% increase in the first, bringing first-half growth to 3%, in line with full-year estimates. The same can be said about air cargo, where volume growth is estimated at 4%.
BASF also reported strong industrial activity with organic growth of 9% in the second quarter, including 3% volume growth. As a result, management was able to confirm its full-year 2018 scenario, with 3.4% growth in the global chemicals industry driven by a 3.2% increase in the global industry and a 3% increase in global GDP. As to investment, Schneider Electric reported buoyant first-half activity with organic growth of 7.3%, which enabled management to raise its full-year growth forecast from 3-5% to 5-6%.
The confidence of economic players can also be seen in the increase in new orders at Kion (forklifts and integrated logistical systems, up 11.9% compared to H1 2017), Bobst (equipment for packaging suppliers, a very good leading indicator, up +13%) and Manitou (small rough-terrain handling vehicles for construction sites, +10%).
The equity compartments of Rouvier funds continued to perform decently. With the MSCI Europe net total return index up 3.1% for the month, it was Rouvier Europe's turn to outperform in July (+3.3%), thanks notably to its positions in industrial stocks. With its more defensive profile, Rouvier Valeurs posted a smaller monthly gain of 2.7%. In keeping with its primary vocation of wealth preservation, Rouvier Patrimoine returned to the point where it started the year, while Rouvier Evolution was down a slight 0.1% for the year, after a monthly increase of 1.6%.
From a macroeconomic perspective, caution is the watchword for the second half of the year, and special attention should be given to any signs of a slowdown in world trade and/or an upturn in inflation. The constant attention we pay to the quality of our investments and our valuations, which we update regularly, remain our biggest strengths to take full advantage of this situation.