In February, the European stock market outperformed its counterparts across the Atlantic once again, with the EuroStoxx 600 showing an increase of +3.4%, while the S&P 500 in Euros decreased by -1.1% and the Nasdaq by -3.7% between January 31st and February 28th.
It’s hard for us to summarize all the events that have occurred in recent weeks, as the news has been so busy, with a very active White House and markets trying to keep up and understand what’s going on. Perhaps the most important thing is the impact that JD Vance’s speeches in Munich and the unprecedented altercation at the White House between Zelensky and the Trump/Vance duo had on Europeans. The situation is now clear: Europe must take responsibility for its own defense, like a grown-up. For all those who had relied on Uncle Sam’s guarantee for decades, the news is shocking. Friedrich Merz, who just won the Bundestag elections unsurprisingly, made some de Gaulle like statements that were staggering coming from a future German chancellor.
So, the most popular stocks on the European market are defense equipment companies, which should benefit from the now inevitable increases in military budgets on the continent. We hold some of them, including Thales and Dassault Aviation. We are betting that the Rafale, already a great success for exports but mainly outside of Europe, will soon find buyers among our neighbors, in the near future.
In the United States, the honeymoon period between the market and the new president seems to be fading. Unlike in 2016, the aggressive announcement of new trade barriers and the discord sown by the administration in various federal agencies seem to be increasingly worrying the market. Everyone knew that tariffs have a negative impact on growth, but we could have hoped for a more measured approach and some leniency towards allied countries like Canada. On the DOGE side, the mysterious Department of Government Efficiency is like a strong remedy injected into the administration. Some of the dysfunctions it has uncovered probably justify shaking things up. These efforts should have long-term benefits, but it must be acknowledged that Musk’s tenacity and the young hackers he has recruited have surprised everyone. This surprise is causing widespread anxiety. Who will be next on the list? Which budget line is at risk of being cut without notice? Which contract will be canceled? We would not mind seeing a little moderation and temperance in the coming weeks and months on that front.
During his first term, Trump had strangely decreed that the American stock market would be the new measure of the success of his policy. Surprisingly enough, all the more as this time he doesn’t seem to care at all. The goal now stated by Treasury Secretary Bessent is to lower long-term Treasury bond rates. However, these rates can be brought down for two different reasons: lower inflation or a recession. It would be preferable to avoid the latter option if possible.
Most of the Clartan funds saw an increase in February. Valeurs rose by +3.1%, Europe by +2.6%, and Ethos decreased by -1.0%. Flexible increased by +1.1%, Multimanagers by +1.8%, and Patrimoine by +0.5%.