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In the first live event of Carmignac teams from Frankfurt and Paris since the coronavirus-related break, Gergely Majoros, a member of the investment committee, addressed the Carmignac Summerlounge in Munich. Majoros shared his insights on the current economic landscape and investment opportunities for both Europe and global markets.
- Selective Exposure to Cyclical Sectors
As the global economy recovers from the pandemic downturn, Majoros identified opportunities in cyclical sectors that are poised to benefit from improved consumer demand and industrial activity. These sectors include industrials, materials, and certain consumer discretionary segments.
- Focus on Quality Growth Companies
Despite the rotation towards value and cyclical stocks, Majoros emphasised the importance of quality growth companies with strong balance sheets and resilient earnings. Technology and healthcare firms that continue to innovate and deliver sustainable earnings growth are particularly attractive.
- European Equities with Structural Advantages
Majoros highlighted interesting investment cases in Europe, especially companies aligned with structural growth themes such as digital transformation, sustainability, and industrial modernization. He recommended selective exposure to European companies that benefit from the EU’s green agenda and recovery funds.
- Diversification Beyond Europe
Given global economic disparities and differing recovery paces, diversifying outside Europe is essential. This may include emerging markets poised to rebound strongly as commodity prices stabilise and global trade recovers.
- Fixed Income with Caution
With interest rates expected to remain low, fixed income allocations should focus on credit quality and duration management. High yield and selective emerging market debt could offer yield opportunities but require careful risk assessment.
- Sustainability and ESG Integration
Consistent with Carmignac’s investment philosophy, integrating ESG considerations remains crucial. Companies demonstrating strong environmental, social, and governance practices are seen as better positioned for long-term performance.
In the USA, the economy is running at full speed thanks to the vaccination campaign and unprecedented fiscal and monetary support. However, Majoros predicted that the US economy will grow beyond potential in the next quarters, but this strong momentum will not last forever. US President Joe Biden's fiscal support is likely to be less than planned, as skepticism prevails among Republicans.
Regarding the Chinese economy, Majoros noted that it has recovered from the crisis last year but is gradually entering a slowdown phase. The Chinese government's efforts to contain debt have negative effects on growth prospects. However, he emphasised that it is hardly possible for investors to ignore the Middle Kingdom. Particularly interesting sectors in the slowdown phase are technology, health, and consumption, with many interesting developments, especially in China.
In terms of fixed income, Majoros stated that bonds can still be exciting in a low-interest environment and can contribute to investment success. However, he warned that bond yields will come under pressure in the slowdown phase, and growth stocks will perform better than cyclicals and value stocks. Rising inflation rates are seen as a significant risk to capital markets, but Majoros considers it primarily a short-term trend, except in the USA where housing prices, rents, and a strong labor market suggest longer-lasting inflationary pressure.
The investment conference had a sophisticated hygiene concept, including a corona test station, ensuring a safe environment for the participants. Frank Rüttenauer, Head of Retail Business Development for Germany and Austria at Carmignac, discussed Carmignac Portfolio Patrimoine Europe as a good option for diversifying portfolios, with a maximum foreign currency component of 20 percent. Carmignac experts invest hardly at all in large Chinese corporations like Alibaba or Tencent, but rather in the second tier.
In conclusion, Majoros advised balancing cyclical plays with quality growth stocks, embracing structural themes in Europe, supplementing with global exposure, and maintaining disciplined risk management—particularly in fixed income—as the economy recovers and markets evolve in 2021.
- In the global investment landscape, quality growth companies, such as technology and healthcare firms, should not be overlooked, even as there is a rotation towards value and cyclical stocks, due to their resilient earnings and potential for sustainable growth.
- When considering investments, it is crucial to be selective in sectors that hold opportunities even in different economic landscapes, like industrial, materials, and certain consumer discretionary segments, as the global economy recovers from the pandemic downturn.
