Indeed, after many months of a \u201cbull run\u201d, purchasing managers’ indices have sudenly fallen as has consumer confidence. While we remain comitted to a longer term view and believe there is no need to worry long term, we suggest volatility will increase in the coming months.<\/p>\n
It’s Europe that is experiencing the sharpest decline in the Purchasing Managers’ Index. This development is not surprising, however, given the strong growth recorded last year in the euro area. After such a progression, this decline is to be interpreted as a return to normalisation.<\/p>\n
In recent times, Germany, the largest economy in the Euro currency zone, and it has been the main driver of economic growth in the region. Tighter exhaust standards are putting the German automotive industry to the test. Nevertheless, this decline should last in the long run because it is a one-off problem. Of course the worries regarding Brexit and a disorderly exit from Europe is also capturing headlines as is the Italian budget , all these are adding to the current state of concern. <\/p>\n
In the United States as well, a slowdown appears to be emerging. Given that the effects of the Trump administration’s stimulus measures (tax cuts) are beginning to fade, it\u2019s also not a surprise. Also the results of the midterm elections make the Presidents strategy less optimal and investigations more likely. <\/p>\n
The weakening of the economic dynamics in the main economic areas and the uncertainty as to the consequences of the commercial conflict between the United States and China is also worrying investors. Nevertheless, the fundamentals, as a whole, indicate a solid evolution of the economy.<\/p>\n
In their individual earnings publications, American companies were less numerous than in the second quarter to fear being penalised for their commercial activities with China. It turns out, for the time being that the trade dispute between the United States and China and subsequent customs sanctions have been less heavily weighted than President Trump had indicated. This indicates that many US companies have probably been able to absorb and adapted to the current situation.<\/p>\n
For several quarters, the operating results of American companies have been excellent. They also see the future with confidence. For these next months and for 2019 as a whole, the outlook remains unchanged. Despite already high figures in 2018, earnings growth forecasts remain high for 2019, at more than 5%.<\/p>\n
Under these circumstances, combined with a fundamentally positive context, we believe there is a case for additional allocation to equity markets on a selective basis.<\/p>\n