Diversified managers enter defense mode-May 13, 2022 10:48

(Photo provider: Adobe Stock-)

(Photo provider: Adobe Stock-)

Historically bad month for the market

Although optimistic at the beginning of the month regarding the progress of negotiations between Kieu and Moscow, major stock markets quickly lost enthusiasm in April. The Dow Jones and S & P 500 experienced the worst April since 1970, while NASDAQ fell -13%, the largest monthly decline since October 2008.

In this context of the bear market, Europe (-1.8%) is a bit better than the US (including -3.2% currency risk), despite the euro / dollar depreciation. Emerging economies (-5.78% MSCI EM) are dependent on the good performance of the Chinese economy and have plummeted again due to health turmoil in major cities in the country.

In Europe, investors supported the revival of defense sectors such as basic consumption (+ 3.93%) and utilities (+ 2.72%), driven by new challenges related to energy sovereignty. Energy must not be defeated (+ 3.45%) and benefits from soaring hydrocarbon prices. Meanwhile, tech stocks, squeezed by the outlook for growth, recorded the worst performance of the month (-7.31%), accompanied by declines in finance (-4.10%) and consumer discretion (-3.53%). ..

Bond markets are in turmoil as economic and financial outlooks bleak. The US yield curve, a symbol of this tension, temporarily reversed at the beginning of the month and panicked among investors who saw it as a precursor to a recession.

Diversified managers have reduced equity risk overall

In Sycomore Next Generation, the equity exposure rate (which had already declined at the beginning of the year and reached 28% at the end of March) dropped to another 24% in April. Note that the period remains low at 1.1 and the cash level remains high at 31%. Echiquier Arty SRI will also be reduced from 27.5% to 24.5%. Beyond the reduction in exposure from the sale of futures, management continues to reduce the wings of securities that are considered to be of high quality type and are performing well. The decrease was greater with Echiquier Flexible Allocation, which reduced equity exposure from 43% to 37%. The decline occurred primarily in the United States and, to a lesser extent, in Europe. The Lazard Patrimoine SRI has a truly defensive bias as it has changed from 15% exposure to 12%.

With R-Co Valor, the exposure has dropped slightly and is now 81%. Manager Yoann Ignatiew continues to benefit mining companies to relocate themselves to a sharply depressed technology.

Carmignac Patrimoine has further reduced equity exposure. Now it’s only 10%. According to management, the market will remain in a stage of adjustment and instability unless the market anticipates a peak in inflation. Similarly, Culturalac Emerging Patrimoine remains 11% equity exposure. Despite all this, managers are confident in the medium term in emerging markets that are showing attractive ratings.

The strongest move was Invest Latitude Equilibre, which moved from 55% to 35% stake. Manager Gilles Etcheberrigaray believes inflationary pressures and growth prospects will continue to decline.

Conversely, Tikehau International Cross Assets took advantage of this decline to make purchases. The exposure will be from 24% to 27%. Keep in mind that managers continue to invest in the credit market.

Overall, Morgan Stanley IM management believes that investors seem to underestimate the Fed’s tightening cycle and inflation should be at a high level. Therefore, they maintain an underweight and defensive positioning of equities through the use of hedged products.

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