During April equity markets continued to be weakened by the international situation. The Stoxx 600 index in Europe slipped 1.2%, whilst in the USA the S&P 500 lost 9% and the Nasdaq 13%, with the latter hit particularly hard by the reaction of Amazon (-24%), Google (-18%) and Netflix (-49%) shares following their latest results. Everything looks as though investors are adjusting the price of risk assets to take account of the stalling of the two engines of market rises: falling interest rates and rising profits.
When it comes to interest rates, the ongoing normalisation of monetary policy confirms the change of approach to inflationary pressures (the IMF is forecasting 5.7% for advanced economies in 2022), which explains the fact that the 10-year rate has already climbed to 3% in the USA and 1.5% in France. As for worries about earnings, there have clearly been dips in activity triggered by the war in Ukraine and China’s application of its “zero Covid” policy, which have created fears of a global supply shock, the repercussions of which cannot be quantified at this stage. Everyone is now facing rising commodity prices (wheat, nickel, oil, gas) and consumer confidence has been affected. Some are beginning to talk about the possibility of a recession in Europe. Meanwhile the IMF, in its latest report, forecast global growth of 3.6% (from 4.4% previously). These uncertainties have emerged at a time when company profits were valued more highly than their long-term historical average, particularly in the USA, which explains the year-to date corrections of -13.3% for the S&P 500 and -21% for the Nasdaq. Earnings multiples have therefore been adjusted to a large extent, but we will need to pay close attention to trends in earnings themselves over the next few months.
Against this background of increased volatility, our funds demonstrated clear resilience in April: the NAV of Clartan Patrimoine was stable, whilst Clartan Évolution gained 0.8%, Clartan Valeurs 0.6%, and Clartan Europe 0.3%. The NAV of Clartan Ethos dropped by 1.7%. Our strategy consists of identifying companies that will be able to preserve their pricing power if the growth/inflation relationship deteriorates for a protracted period and that remain attractively valued: commodities groups (Imerys, Shell, TotalÉnergies), more defensive profiles such as healthcare (AstraZeneca, Novartis, Sanofi), and companies with specific stories that are at an excessive discount (IBM, Stellantis, Vivendi). In a global environment seeing a phase of economic and political fragmentation, our stock-picking approach has two virtues: prudence and diversification.