Company interim results have confirmed the slowing of global growth and have highlighted a few pockets of contraction. BASF, our standard barometer, is now only expecting growth of 1.5% for industrial demand in 2019 (from 2.7% expected at the beginning of the year). BASF observed a particularly sharp downturn in the automotive industry in the first half (-6%), and has revised this year’s forecasts for this sector from modest growth of 0.8% to a contraction of 4.5%. However, the company believes that the healthy performance in the services sector should enable global GDP growth to hit 2.5% this year (from an initial estimate of 2.8%).
Strong consumption in the cosmetics and food sectors helped Givaudan post organic growth of 6.3% for the first half, with growth of 3.5% in mature economies and 10% in emerging markets. By contrast, Schneider Electric paints a more mixed picture when it comes to investment: whilst the energy efficiency sector, which has low correlation to global growth, saw continued gains at 6.9%, the more cyclical industrial automation sector was stagnant over the first half and contracted by 1.1% in the second quarter.
The drop in orders at Bobst, a supplier of equipment to the packaging industry and a good advance indicator, confirms the maturity of the economic cycle (-15% over the first half, after four years of uninterrupted growth from 2014 to 2018). When it comes to global trade, Kuehne & Nagel have observed a slight slowing of growth in sea freight (2.5% in H1 2019, from 3% in H1 2018) and a fall in air freight volumes.
This mixed macroeconomic picture was anticipated by the financial markets in the correction of late 2018, which was made up over the first half of this year in response to the measures taken by central banks to prolong the cycle. At the end of July, the US S&P 500 and European Stoxx 600 indices were respectively 1.7% higher and 2.8% lower than their 2018 peaks, with gains over the year to date of 18.9% (1.3% in July) and 14.3% (0.2% in July) respectively.
The Rouvier SICAV compartments benefited from this background, which favoured ‘bottom-up’ stock selection over a ‘top-down’ trend-based approach. Rouvier Valeurs had gained 19% in 2019 by end-July, with market exposure of 81%; Rouvier Évolution retained a gain of 12.6%, with exposure reduced to 48%; Rouvier Europe (up 15.8%) continued its recovery, with a performance in line with the European index; whilst Rouvier Patrimoine (up 3.6% with an equity investment level of 17.2%) remained in line with its goal of secure performance.