With the MSCI Europe Net Index (total return) gaining 9.6% to 30 September (compared to 6.7% to 30 June) and the MSCI World Net Index up 3.5% in euros (2.3% at end-June), equity markets recovered strongly at the end of the third quarter, thanks to an excellent month in September.
This fresh impetus, after the slight increase in risk aversion over the summer, could seem surprising given the political and climatic background: tension on the Korean peninsula; a mixed result in the German elections, causing some to worry that Europe’s largest economy could turn in on itself; the beginning of the real debate in the UK and Europe on the implementation of Brexit; and the growing number of major weather disasters. To date, the stand-off in Catalonia does not seem to have affected the markets.
This illustrates the fact that in the absence of liquid and secure alternatives to equities, the markets are focusing on the good health of the global economy and on company earnings, where first half releases, as analysed in previous editorials, have highlighted the positive trend. The markets’ gains might find support from the return to the agenda of tax reform in the USA, now focused on repatriating US companies’ profits and the deductibility of investment spending. This could trigger a rise in the dollar and in US 10-year rates.
The equity compartments of the Rouvier SICAV continued to return respectable performances against this background. Rouvier Valeurs showed a gain of 3.6% for the quarter and for the month of September, taking its gain for the year to 9.5%, whilst retaining its capital protection position and holding 15.5% in cash.
Rouvier Europe is up 9% for the year, having gained 2.7% over the quarter with a 3.8% rise in September alone. This positive trend can only be amplified when the financial sector securities held, whose solid first half performances have been welcomed by analysts, join the rising trend in the markets.
Rouvier Évolution, which is up 4.4% for the year to date following its 2.3% gain in September, has benefited from the rise in the underlying Rouvier Valeurs fund. Its systematic hedge remains costly so long as volatility does not increase, but this policy has had the merit of not requiring its managers to speculate on the outcome (mixed, as it happens) and market impact (nil, in this case) of developments such as the German elections – whilst also protecting investors against ‘black swan’ events, which are unpredictable by definition.
Rouvier Patrimoine continues to meet its targets and is now 2.2% up for the year to date (1.7% at end-June), thanks to the good performance of its bond component (up 0.4% before fees, against a bond benchmark that was down 0.3%) and the contribution of its equity component (up 14.5% before fees).