Rien n’a changé en une semaine. Les actions sont toujours recherchées et les obligations un peu délaissées. Rien n’a changé, si ce n’est, l’appétit croissant pour le risque des investisseurs… Ceux qui ont loupé le rebond des marchés depuis le début du mois de juin ? Les explications de Jan Loeys et son équipe chez JPMorgan.
« Another week of equities rallying and bonds selling off across the world. The initial phase of this move was driven by position squaring, in response to what we called last week tantalizing signs of a growth lift and no news on the twin US and European fiscal crisis. But now there are more signs of investors putting on outright bullish positions.
For these growth bullish and pro-risk market moves to continue, we believe we need to get fundamental support, both from better economic activity data and fading fiscal event risks. There is no news on the fiscal front, but further signs that the expected lift in activity from the lows in June is likely talking place. As a result, our economists are upgrading their risk bias around H2 growth from negative to balanced. This is very far from being outright bullish on economic growth. Our headline projections for world growth in the second half of this year still stand only at 2 1/4%, which is a full percentage point below what we consider trend, or potential growth.
But beyond economic data, risk markets will also likely be driven by the continued twin fiscal crises in the US and Europe. In the US, the presidential campaign is morphing into a debate on fiscal policy and the role of government in society. Recent polls are even. We believe the gyrations in these polls over the next 1-2 months will be one important factor that will drive the relative performance of equities versus bonds, both in the US and elsewhere.
There is virtually no news on the European fiscal front. But no news is good news at the moment, as it reflects a lack of opposition to the new ECB plans, though also that few know what the plans entail. Italy and Spain normally don’t issue bonds in the middle of August, and that clearly helped push down their yields. This induced managers to cut part of their European underweight.
In our view, the true test for European markets, and risk markets globally, will be whether Italy and Spain can issue bonds at these lower yield levels, and whether the ECB, at its Sep 6 meeting, can provide uplifting details on its new plan to provide support for EMU members asking support from the EFSF and ESM. Mr Draghi’s press conference of two weeks ago started a strong rally in periphery bonds that could signal improved demand at Italy’s and Spain’s bond auctions late this month and early next month. We are not convinced as there has been little new buying since. Most investors appear to be in wait and see mode, awaiting the ECB’s new plans.
There has been no information coming from the ECB. We expect that having put the seniority issue on the table, Mr Draghi’s ECB cannot now turn around and claim seniority for ECB holdings over the private sector in the case of default or restructuring, as happened de facto with Greece. But beyond this issue, opinions are highly diffuse on what the ECB will say on Sep 6. Mr Draghi clearly wants to say that actions will be “adequate,” but he will have to bring the rest of the ECB with him. To this author, at least, Mr Draghi’s dramatic LTRO action last year biases the risk to the upside now.
Overall, the reduced downside risk on economic growth, and risk that the ECB will pull another LTRO surprise are forcing us to further cut some of the defensive parts of our model portfolio. We thus cover our long duration positions in Germany and EM local markets; our overweights of Defensive stocks, and our outright long in HG, which we switch into HY and a spread long vs USTs. »