Coffee Break 4/6/2021


  • England’s stay-at-home lockdown order ended on Monday while France decided to close schools for at least three weeks as part of new national restrictions.
  • In the US, President Joe Biden unveiled last Wednesday his $2 trillion infrastructure plan saying it was “a once in a generation investment.”
  • After the Suez Canal was unblocked, oil prices showed some volatility as there were concerns about a potential yield output constraint ahead of the OPEC meeting that took place last Thursday.
  • As the global vaccine rollout continues, US Government researchers have released a study showing that, as COVID-19 vaccines from Pfizer and Moderna effectively prevent infections, not just illness, this reduces the spread of the virus in real-world conditions.



  • The US job report showed a significant hiring surge (+916k) as increased mobility, less Covid restrictions and more leisure spending led to an improvement in the labour market.
  • FED and ECB will release their latest accounts while focus will also be on the IMF and World Bank spring meetings, which will be taking place virtually and include several speakers such as Fed Chair Jerome Powell.
  • Several countries (US, Canada, UK, Germany) will release their February balance of trade, which will draw focus as the WTO expects merchandise trade to rise by 8.0% in 2021. 
  • Chilean President will ask Congress to postpone the election of an assembly to write a new constitution from April until May, due to a rise in coronavirus cases, while Peru is still on track to hold Presidential elections on April 11. 


  • Core scenario
    • Our scenario of a global economic rebound, followed by a genuine growth-driven recovery, is unfolding. Recent market moves have put the focus on our investment convictions. The mechanical rebound of growth shall be followed by a transition supported by central banks and governments towards a sustainable recovery. The accumulated consumer savings will likely support a COVID-19 sensitive spending rebound, igniting hereby a positive feedback loop in the economic recovery.
    • In the US, bond yields are rising fast. A point of equilibrium should be found between a renewed interest for US bonds without jeopardising the recovery if the increase is too steep and/or too fast.
    • In Europe, our central scenario assumes a comeback to growth trend by end-2021 and a implementation of the Next Generation EU plan in H2. Economic indicators reveal a large gap to be filled between services and manufacturing, as the latter has already started to benefit from the economic rebound. Hence, the reflation trade could well move into a next stage as the economy reopens.
  • Market views
    • Financial markets have started to transition towards a “normalisation phase” in February. In spite of rising rates, it appears too early for the era of “There Is No Alternative” to be called into question.
    • Flows into equities continue from both private and institutional investors as the environment currently remains compatible with equity upside - under the condition that earnings growth accelerates.
    • We have exposure to recovery/re-opening related assets: Overweight equities vs. bonds, European and US banks, US and UK small and mid-caps, and exposure to commodities, GBP and NOK.
    • Simultaneously, our core portfolio keeps the most resilient themes and countries.
  • Risks
    • The duel virus vs vaccine rollout. Vaccinations have the upper hand currently, but the appearance of new variants and the transition towards an endemic virus will raise new questions.
    • Uncontrolled rise in bond yields. For the moment, central banks lack an exit plan from super-low interest rates while rising real rates and inflation expectations start pointing to fears from a demand shock and overheating growth.
    • Geopolitical tensions. Revived tensions between China, and/or Russia, and the US can no longer be excluded.
    • Political uncertainty: The social divide is widening between losers and winners of the health crisis and quite a few key countries have elections coming up in the next 24 months starting with Germany which will elect a new Parliament in September.


Financial markets have started the delicate transition towards a “normalisation phase” in February. In that context, on the fixed income side, interest rates shall continue to rise - both real and nominal. Meanwhile, on the equity side, the budding transition has been the trigger for some volatility and a sectorial rotation towards value and cyclical sectors. Hence, we remain overall overweight equities and our strategy is geared towards reflation trades and long-term winning sectors. On the fixed income side, we remain underweight government bonds and expect a widening transatlantic spread. We remain long commodities, which, should still benefit from the catch up demand. We tactically reduced our exposure to the technology sector. We have also trimmed our exposures to gold and JPY.



  • 2021 is a recovery year and we anticipate a strong profit rebound. We still prefer equities.
    • We stay overweight European equities, especially euro zone and UK. European equities will benefit from the turn in market drivers vs. pandemic. The successful vaccine rollout is a game changer for the UK economy as activity should pick up faster than on the continent. In addition, UK equity valuations still remain relatively attractive.
    • We remain overweight emerging markets equities and recently added to our Latin America allocation as the region offers high exposure to value assets with attractive valuation and strong potential for a rebound.
    • We are neutral US equities, with a preference for US banks and small and mid-caps over the technology sector, which we temporarily reduced to a neutral stance.
    • We are also neutral Japanese equities.
    • We keep key convictions in various long-term thematic investments. In particular, Oncology and Biotech sectors reveal high growth potential driven by innovation and pricing power.
    • We believe that climate and environmental themes enable exposure to key solutions for a cleaner future and will continue to gain in importance as infrastructure plans are becoming green, from China to Europe, and also the US under a Biden administration.
  • We are underweight bonds, keeping a short duration, but highly diversified as the current environment is also creating opportunities in the bond market.
    • We reduced duration on US debt and remain overweight European peripheral government bonds.
    • In a multi-asset portfolio, we focus on the source of the highest carry, i.e. emerging debt. We stay neutral US and European investment grade credit.
    • We reduced our exposure to JPY vs. USD and gold.
    • We have an exposure to rising commodity prices, via a basket that also includes currencies, such as the AUD, the CAD and the NOK and remain long GBP.

Our positioning