In September, the European stock market ended the month with a slight increase of 1.5%. The American indices denominated in euros rose a bit more: the S&P 500 gained 3.1% and the Nasdaq 5.1%.
The French situation, following the anticipated fall of François Bayrou, seems to be stabilizing. The president has not dissolved the National Assembly, at least not yet, and has quickly appointed a new prime minister. Budget negotiations seem to be continuing behind the scenes, although there is no indication that they will ultimately succeed. The market is not mistaken in this regard and has pushed the France-Germany debt spread to the same level as that of Italy. The latter is more indebted, but its deficit is now better controlled than that of France, with a primary balance (excluding interest) that is almost zero. The inevitable fiscal consolidation of the country has become a political ordeal for Emmanuel Macron, and regardless of future events, budgetary support for economic activity is ruled out for several years. This is why we continue to be cautious on companies that are too exposed to the French economy.
At our German neighbours, investors are growing impatient regarding the Merz government’s stimulus plan for defence and infrastructure. As is often the case in the markets, some would like an announced plan to be executed immediately, which is, of course, impossible. Let’s bet that they will soon be reassured.
The security situation in Eastern Europe continues to escalate, with Russian air incursions into NATO countries like Poland, but the markets, like us, are not particularly concerned at this stage. Although President Trump has not yet managed to broker a deal between Ukraine and Russia, the latter is certainly drained and realistically cannot engage in an aggressive war against another Eastern European country for several years.
In the stock markets, we have noticed that the semiconductor sector has recently shown strong performance. The practical use of AI seems to have accelerated significantly in recent months, and industry players are trying to keep up by launching increasingly large data center projects. In our portfolios, companies like ASML, a manufacturer of lithography machines for chips, Micron, a memory manufacturer, and Legrand, a manufacturer of electrical components, have benefited from this trend.
The eternal debate over the valuation of American equities is once again in full swing. With nearly half of its index comprised of technology equities, compared to 7% in Europe, the price-to-earnings (P/E) ratios are seen as too high by many. We will simply note that certain equities, considered threatened by AI, such as Salesforce, Adobe, or Accenture, have been punished by the market. There is no generalized bubble today like there was in 1999-2000. Conversely, the companies that have seen their valuations rise the most are OpenAI ($500 bn), Anthropic ($180 bn), xAI ($200 bn), and the small French company Mistral (€14 bn). None of them are listed to date. The notorious passive “flows” into American indices cannot explain this situation. Since the arrival of ChatGPT in November 2022, generative AI has continually surprised us with its dynamism, and it seems premature to bet on its decline.
The Clartan funds overall also saw a slight increase in September. Valeurs showed +5.1%, Europe +1.3%, and Ethos decreased by -0.5%. Patrimoine reported +0.1%, Flexible +0.7%, and Multimanagers +0.9%.