We are devoting our editorial for this third quarter and the month of September to an analysis of equity market performance since the beginning of the year and an examination of the performances of the compartments of the Rouvier SICAV.
The two main equity markets continue to see mixed fortunes, with the European Eurostoxx 600 down 1.5% for the year to date, whilst the S&P 500 in the US has gained 9%. In the latter case it is important to separate the exuberance of the so-called ‘GAFAM’ stocks (Google, now called Alphabet, Amazon, Facebook and Apple plus Microsoft), which make up 15% of the index and have gained 39% on average, from the more modest performance of the rest of the index, where gains have barely reached 5%.
Whilst the US market has benefited from the short-term positive impact of the Trump stimulus, which is mainly fiscal in nature, and is oblivious of some longer-term negative effects, its counterpart in Europe, where economies are much more dependent on international trade, has suffered from threats, no less Trump-inspired, to world trade as well as from specific European political uncertainties.
The Rouvier Valeurs compartment has gained 1.5% since the beginning of the year, with an equity investment rate of 83%. Excluding cash and fees, its equity element has gained 4.4%, with gains of 2.7% for its European core and 14.5% for its dollar diversification, which tends to indicate that stock selection has been beneficial.
A comparison with the MSCI World index is less flattering, but not necessarily relevant. This index, covering markets in 23 developed economies, includes 61% of US stocks. Its gain of 5.4% in dollar terms since the beginning of the year is entirely attributable to these stocks, with 60% of it coming from GAFAM stocks. Because of the dollar’s gains over the year so far, this index’s performance in euros is higher, at 9.0%. The contributions from GAFAM stocks and the dollar have been unfavourable to us this year, as they have been since the dollar’s gains began (it has risen 16% against the major global currencies since 2014), and have come alongside what might appear to be a new tech-stock bubble. This will not however tempt us outside our field of expertise in an attempt to predict currency movements or to value companies whose profitability is not yet sustainable.
Turning to other compartments of the SICAV: Rouvier Évolution (-1.1%) pays 2.6% for its systematic hedge, the benefits of which – by definition – only become apparent in the event of a sudden and unexpected market downturn.
Rouvier Europe (-5.2%) has continued to suffer from its value positioning. The negative performance of its equity component before fees (-3.4%) was attributable for -2.1% to the 22% holding in financial stocks and for -0.7% to the market incident at Atos, discussed in our Editorial last month. In both cases we remain confident in the solidity of the stocks and in their potential to bounce back.
Rouvier Patrimoine, which is down 0.7% for the year to date, continues to contain the decline in its benchmark bond index (-0.9%).