Coffee Break 4/12/2021


  • The US non-manufacturing PMI reached 63.7 in March, its highest reading ever, while the number of Americans filing for unemployment benefits rose as Pandemic Unemployment Assistance (PUA) claims sharply dropped.
  • The price of oil declined as OPEC+ members decided to increase production along with Iran's intention to increase its production after indirect talks with the US concerning the nuclear deal.
  • Fed Chairman Jerome Powell repeated that the ongoing economic recovery in the US was "uneven and incomplete”, while the RBA announced it would keep interest rates unchanged.
  • IMF raised its 2021 forecast for global economic growth to 6% from 5.5% on the back of recent stimulus package from the US and vaccines roll out.



  • The US will release its inflation data on the back of Fed Chairman Jerome Powell maintaining expectations that an anticipated rise in inflation this year would be temporary.
  • The earnings season will kick off with big banks and other large companies will release Q1 results. Elsewhere, China will be releasing its Q1 GDP estimate.
  • Investors will closely monitor volatility as April started off with a rally causing the VIX to drop at its lowest level since February 2020.
  • The situation will be monitored in Northern Ireland after riots erupted last week as pro-British loyalists protested against the Irish Sea border imposed as a result of the Brexit deal.


  • Core scenario
    • Our scenario of a global economic rebound, followed by a genuine growth-driven recovery, is unfolding. Recent market moves have put the focus on our investment convictions. The mechanical rebound of growth shall be followed by a transition supported by central banks and governments towards a sustainable recovery. The accumulated consumer savings will likely support a COVID-19 sensitive spending rebound, igniting hereby a positive feedback loop in the economic recovery.
    • In the US, bond yields have risen fast and are now reaching a point of equilibrium without jeopardising the recovery.
    • In Europe, our central scenario assumes a comeback to growth trend by end-2021 and an implementation of the Next Generation EU plan in H2. Economic indicators reveal a large gap to be filled between services and manufacturing, as the latter has already started to benefit from the global economic rebound. Hence, the reflation trade could well move into a next stage as external demand surges and domestic demand is set to recover.
  • Market views
    • Financial markets are undergoing a “normalisation phase” in a unique bullish macro environment. In spite of rising bond yields, it appears too early for the era of “There Is No Alternative” to be called into question.
    • Flows into equities continue from both private and institutional investors as the environment currently remains compatible with equity upside - under the condition that earnings growth does not disappoint.
    • We have exposure to recovery/re-opening related assets: Overweight equities vs. bonds, preference for ex-US to US equities, keep European and US banks, US and UK small and mid-caps, and exposure to commodities, GBP and NOK.
    • Simultaneously, our core portfolio keeps the most resilient themes and countries.
  • Risks
    • The duel virus vs vaccine. Vaccinations have the upper hand currently, but the appearance of new variants and the transition towards an endemic virus will raise new questions.
    • Uncontrolled rise in bond yields. For the moment, central banks lack an exit plan from super-low interest rates while rising real rates and inflation expectations start pointing to fears from a demand shock and overheating growth.
    • Geopolitical tensions. Revived tensions between China, and/or Russia, and the US can no longer be excluded.
    • Political uncertainty: The social divide is widening between losers and winners of the health crisis and several countries have elections coming up in the next 12 months starting with Germany which will elect a new Parliament in September.


Financial markets are in an unique bullish macroeconomic environment as the “normalisation phase” is under way. In that context, on the fixed income side, interest rates should continue to rise (both real and nominal). On the equity side, the transition has cleared up some uncertainties causing a decline in volatility, while sectorial rotation towards value and cyclical sectors is still at play. Hence, we remain overall overweight equities and our strategy is geared towards reflation trades and long-term winning sectors. On the fixed income side, we remain underweight government bonds, and expect sovereign bond yields to move higher. We expect that commodities should benefit from the catch-up in demand. Recently, we took profit on our relative trade on transatlantic sovereign spreads. We increased exposure to Japanese equities vs. US equities. We slightly decreased our global overweight exposure to the banking sector to finance the purchase of consumer staples names.



  • 2021 is a recovery year and we anticipate a strong profit rebound. We still prefer equities over bonds.
    • We stay overweight European equities, especially euro zone and UK. European equities will benefit from the turn in market drivers vs. pandemic. The successful vaccine rollout is a game changer for the UK economy as activity picks up faster than on the continent. In addition, UK equity valuations still remain relatively attractive.
    • We remain overweight emerging markets equities, with an exposure to Latin America as the region offers high exposure to value assets with attractive valuation and strong potential for a rebound.
    • We are underweight US equities, as strong global growth should be beneficial to other regions. We keep our overweight US banks and small and mid-caps to capture strong domestic demand.
    • We are overweight Japanese equities, as high correlation to global PMI new orders imply strong operational leverage in a context of accelerating global growth.
    • We keep key convictions in various long-term thematic investments. In particular, Oncology and Biotech sectors reveal high growth potential driven by innovation and pricing power.
    • We believe that climate and environmental themes enable exposure to key solutions for a cleaner future and will continue to gain in importance as infrastructure plans are becoming green, from China to Europe, and also the US under a Biden administration.
  • We are underweight bonds, keeping a short duration, but highly diversified as the current environment is also creating opportunities in the bond market.
    • We keep a short duration on government bonds
    • In a multi-asset portfolio, we focus on the source of the highest carry, i.e. emerging debt. We stay neutral US and European investment grade credit.
    • We reduced our exposure to JPY vs. USD and gold.
    • We have an exposure to rising commodity prices, via a basket that also includes currencies, such as the AUD, the CAD and the NOK and remain long GBP.

Our positioning