Points to bear in mind following this black swan event on equity markets?
1. This health crisis has highlighted the fragile environment of the equity market.
The years of exceptional monetary policies have, by crushing volatility, led investors towards risky assets, and consequently made them more vulnerable. Therefore, the shock created by the sharp fall in demand led to an indiscriminate decline in the equity markets.
2. The large measures announced cannot claim to be driving an economic recovery.
While central banks and governments have, through their announcements, calmed the markets, these measures are more of an income replacement than a stimulus. The negative impact of this crisis on the economy and corporate earnings, especially due to its duration, could be much greater than what is priced into the market.
3. Beyond the impact on earnings, two equity market drivers will be weakened.
The dynamics of corporate share buybacks, the main driver of the US equity market in recent years, have changed. Most of them have already been cancelled. Also, some companies, particularly in Europe, have been forced to cancel their dividend payments.
4. This crisis will have a more structural impact, particularly on consumption patterns.
These new habits, adopted in these exceptional circumstances we are experiencing, could lead to an acceleration of structural trends, such as digitalization. In the coming months/years, these disruptive trends could benefit sectors as diverse as distribution, including food, health or entertainment, and video games.
Disruptive thematics at the heart of Carmignac Investissement
Given this very unstable growth environment, we have concentrated the equity portfolio on companies with growth profiles that are not very sensitive to the macro-economic environment. These companies can mainly be found in the technology, healthcare and consumer sectors.
We are trying to take advantage of the indiscriminate decline in equity markets to strengthen our positions. On the other hand, ‘cheap’ does not necessarily mean ‘attractive’. Therefore, we are focusing only on the most robust companies, as the environment will remain very fragile in the coming months.
Our core portfolio remains exposed to disruptive themes linked to changes in habits, some of which have been accelerated by the lockdown:
JD.COM INC | e-commerce | 3,9% |
AMAZON.COM INC | e-commerce | 3,7% |
NINTENDO CO LTD | Video games | 2,3% |
58.COM | e-commerce | 2,0% |
SEA LTD | e-commerce | 1,7% |
FACEBOOK INC | Big data | 3,9% |
ALPHABET INC | Big data | 3,9% |
INTERCONTINENTAL EXCHANGE | Fintech | 3,0% |
SALESFORCE.COM | Cloud & software | 2,3% |
GODADDY INC - CLASS A | Connectivity | 2,3% |
ANTHEM INC | Value Healthcare spending | 2,3% |
CHONGQING ZHIFEI BIOLOGICA-A | Consumer Health & wellness | 1,8% |
SANOFI-AVENTIS | Consumer Health & wellness | 1,7% |
CENTENE CORP | Value Healthcare spending | 1,4% |
WUXI BIOLOGICS CAYMAN INC | Consumer Health & wellness | 1,3% |
Source: Carmignac, 31/03/2020
This is an advertising document. This document may not be reproduced, in whole or in part, without prior authorisation from the management company. This document does not constitute a subscription offer, nor does it constitute investment advice. The French investment funds (fonds commun de placement or FCP) are common funds in contractual form (FCP) conforming to the UCITS Directive under French law. This document is intended for professional clients. Carmignac Portfolio refers to the sub-funds of Carmignac Portfolio SICAV, an investment company under Luxembourg law, conforming to the UCITS Directive. The return may increase or decrease as a result of currency fluctuations, for the shares which are not currency-hedged. Reference to certain securities and financial instruments is for illustrative purposes to highlight stocks that are or have been included in the portfolios of funds in the Carmignac range. This is not intended to promote direct investment in those instruments, nor does it constitute investment advice. The Management Company is not subject to prohibition on trading in these instruments prior to issuing any communication. The portfolios of Carmignac funds may change without previous notice. Access to the Fund may be subject to restrictions with regard to certain persons or countries. The Fund is not registered in North America, in South America, in Asia nor is it registered in Japan. The Funds are registered in Singapore as restricted foreign scheme (for professional clients only). The Fund has not been registered under the US Securities Act of 1933. The Fund may not be offered or sold, directly or indirectly, for the benefit or on behalf of a "U.S. person", according to the definition of the US Regulation S and/or FATCA. The Fund presents a risk of loss of capital. The risks and fees are described in the KIID (Key Investor Information Document). The Fund's prospectus, KIIDs and annual reports are available at www.carmignac.com, or upon request to the Management Company. The KIID must be made available to the subscriber prior to subscription. - In Switzerland, the Fund’s respective prospectuses, KIIDs and annual reports are available at www.carmignac.ch, or through our representative in Switzerland, CACEIS (Switzerland) S.A., Route de Signy 35, CH-1260 Nyon. The paying agent is CACEIS Bank, Paris, succursale de Nyon/Suisse, Route de Signy 35, 1260 Nyon. - In the United Kingdom, the Funds’ respective prospectuses, KIIDs and annual reports are available at www.carmignac.co.uk, or upon request to the Management Company, or for the French Funds, at the offices of the Facilities Agent at BNP PARIBAS SECURITIES SERVICES, operating through its branch in London: 55 Moorgate, London EC2R. This material was prepared by Carmignac Gestion and/or Carmignac Gestion Luxembourg and is being distributed in the UK by Carmignac Gestion Luxembourg UK Branch (Registered in England and Wales with number FC031103, CSSF agreement of 10/06/2013).