SUMMARY OF THE MACROECONOMIC INFORMATION
The macroeconomic scenario
Solid US growth, the euro zone recovery drink. In the United States the employment trend extremely robust and strength of consumption more than offset the disappointing performance of the external sector and investment. In Europe there are many factors to support the growth as oil prices falling and the weaker euro, combined with turning expansionary monetary policy.
The stock market
European indices turn the page. Continued relative strength index Eurozone, benefiting from the favorable context, supported by the three support of ECB policy, the weak euro and lower oil prices. US indices renewed highs, driven by macroeconomic data and better than expected quarterly in 67.2% of cases.
The bond market
Euro rates compressed thanks to the ECB. The expansive monetary policy of the ECB’s affecting the rates of return that will remain compressed again for a long period. On the periphery in the short term it will be the political landscape, primarily Greece but also the approach of the Spanish election, affect the performance, while the start of purchases of government bonds by the ECB should support the sector.
Currencies
Continued strength of the dollar due to the Fed, euro and yen downward. Unchanged the framework on the exchange market: Dollar consolidates ii you own upward trend, with the Fed seems willing to move on rates by June. The euro, already fallen at the opening in 2015, continuing its downward trend since the start of the ECB purchases, down to a minimum to you the years against the dollar and leaving the door open to further depreciation.
Commodities
The weakness of the commodity persists. It confirms the weakness of all segments of the resource base, at least in the first part of the year. Operators remain far from the commodity because of the weak growth figures in Europe, although in recovery, and in Asia even in the face of mild recovery in oil prices. The energy sector remains anchored to geopolitical events in North Africa and the Middle East.
Macroeconomics
USA: continuous growth, the Fed is preparing the first rate hike. Preliminary estimates indicate a slowdown in GDP growth in Q4 delta 2014. Negative is also the contribution of the external accounts that, conditioned by the strengthening of the dollar, have seen a widening of the trade deficit. Prospects remain favorable for the next few quarters given the strength of domestic demand: the low cost of oil and progress on the labor market will support disposable income and consumption in addition, recent months have seen signs of improvement for the construction industry with a recovery in demand for homes in January and new (albeit modest) price pressures. On the delta monetary policy the main obstacle to normalization is represented now discounted by inflation. After that December saw a further decline in the short term is expected to further slowdown in prices due to the downward pressure from the energy component. Although the medium-term expectations remain favorable, the wording of the press in January the Fed still indicates that the Fed will be “patient” in the management of the standardization process, indicating that the first rate hike will not happen before June.
Area euro: low inflation and weak recovery. 2014 ended with a growth higher than expected for the euro zone, with an acceleration of GDP from + 0.2% to + 0.3% qoq in Q4 driven by the strong performance of the German economy. THE new year opens, for the first time to time, with positive news for the evolution of the European economic cycle: several were in fact the elements intervened in support of accelerating growth. Took note of the European Commission, which in updating estimates Winter cited the decline in oil prices, the depreciation of the euro and the launch of QE (Quantitative Easing V of the ECB, that the purchase of securities on the market) as elements of the stimulus. To these factors are added and higher margins on the front of fiscal policy: new guidelines for the application of the Stability and Growth Pact in fact introduce new criteria for determining the amount of correction required (deficit). The fiscal effort is reduced depending on the distance between real growth and potential output gap and the level of debt to GDP, with new terms for investment and the implementation of structural reforms. All these measures will have the effect of favoring countries with low growth and high debt stock (Italy in particular). Acceleration waiting for the European GDP during 2015, however, also corresponds to a downward revision of the inflation profile. If fact î factors mentioned so far should support exports and production, still are timid signs of growth relative to domestic consumption, much less progress was observed in the labor market. Are only negative surprises in terms of price indices, with European inflation fell in January to a new record low of 0.6% on an annual basis. We expect the first half of the year still see negative growth rates for the growth of European prices.
SUMMARY OF OPERATING SUGGESTIONS
The global economy seems to continue the path of progressive return to growth albeit with signs of disparity between different geographic areas. Still positive signals from the euro, which in recent weeks has continued the improvement in key leading indicators and confidence. In the US state of health of the economy it remains good thanks to the labor market and the housing sector. In addition to the information provided by the main macroeconomic statistics in the coming months will be two main elements that will affect real economic activity. The first is related to the dynamics of the price of oil and the benefits that the decline in its price should have on consumption. The second is related to the activity of the central banks: in all areas where the attitude of monetary policy remains expansive as in euro area, Japan and some emerging countries (including China where the People’s Bank of China has recently stepped in with rate cut) this should result in an improvement in the main economic indicators real. In recent weeks bond market, pending the appointment of ECB’s monetary policy on March 5, it was mainly influenced by the geopolitical events in progress, in particular in Ukraine, Libya and the Middle East, and the financial crisis in Greece. U ongoing discussions between the monetary authorities in Europe and the country has not yet affected the peripheral bond markets, such as those supported by the expectation care for the imminent launch of the ECB’s program of quantitative easing. The different phase of monetary policy in the euro area than in the US and the UK remains the main discriminating in their bond markets. The relevance of the measures announced by the ECB and the absence of inflationary pressures continue to create an environment conducive to the sector in the euro area stock markets continue to benefit from the high liquidity injected into the system by central banks to stimulate the interest of investors to the riskier asset classes The good indications from the surveys, with the first signs of recovery in the real economy and the quarterly results of the company than expected, further sustained investment in the sector, pushing the main lists of new levels of maximum confirm a moderately positive view on the asset class in the medium term perspective of being supported by the improved outlook of recovery in the global economic cycle, both stimulated by expansionary monetary policies of the European Bank Centered that the effects of the decline in energy prices on consumption, which can lead to increased global demand and a consequent improvement in the estimates of corporate earnings growth. However, the risks of an increase in volatility, linked political and economic instability in various areas of the world, suggest a cautious approach to investment and adequate diversification with equity instruments managed according to non-directional strategies.
STOCK MARKET
Support from QE, oil and swears weak. Encouraging signs coming from the macroeconomic data, supporting expectations of a slight recovery in Europe, with positive effects on corporate balance sheets, helped by lower commodity prices and the weak euro. The announcement of the agreement between the government greek and the European Union is reducing the peaks of volatility in the previous period, even if the trend of the main indices presents steep and in some cases long levels “overbought”. Geopolitical risks remain related to the war between Russia and Ukraine, the precarious situation in Libya due to terrorism and ultimately to reduced but persistent risk Greece will lower oil prices favors a recovery in GDP in the importing countries, but strongly penalizes the energy sector had to review the investments. The Euro Stoxx confirmation assessments above the historical average in terms of the relationship between price and useful, but the expectations are for a double-digit earnings growth for the next two years; Moreover, you confirm that a recovery current quarterly and 70% exceed the estimates. In the euro area continues the positive trend in European shares with the Euro Stoxx index that year to date gains around 15%. The start of the QE by the ECB, signs of economic recovery in Europe and the depreciation of the euro against the dollar bring positive effects on most sectors of the stock market in a climate of tolerance for risk and volatility is low, the US indices recorded new highs. A further support is also added the words of Fed Chairman during a hearing in the Senate, which would alleviate concerns about a rise in interest rates earlier than expected. H positive environment is also favored by the partial easing of tensions in Europe after the agreement with Greece and the expansive new intervention by the Central Bank of China to counter the recent signs of slower economic growth in the Asian country.
OPERATING SUGGESTIONS STOCK MARKET
In recent weeks the real economic activity in the euro area has surprised to the upside with a continuation of the trend of improvement of some statistics related to trust and principalities leading indicators. This aspect, together with the operations of monetary policy by the European Central Bank continue to support the investment in European equity markets. Despite the multiple evaluation have reached the levels of the beginning crisis, making stock prices less affordable than in previous months, however, the investment in the euro area is still attractive in relative terms, from the perspective of a progressive return to the evaluations press in the wake of crisis cycle recovery and improved estimates of corporate earnings growth. European companies active on the international scene are in fact made more competitive by the weakening of the domestic currency that favors exports and increases visibility on revenue growth and sustainability of cash flows. In this context it is useful to diversify exposure with a bet on the segment of small / medium enterprises, in a phase of recovery in the economy and in a context of high risk appetite from investors tend to record higher returns than large capitalization stocks.
BOND MARKET
Government bonds: the ECB buying European sovereign debt market, especially peripheral, it remains well supported by a number of positive factors. L ‘”storage”, at least temporarily, the clash between Greece and Europe has reduced market volatility an important factor, while waiting for the actual start of the QE, it is fueling upward pressure on prices of the securities in circulation, especially those with longer maturities. During a press conference earlier this month, the ECB has made it clear that the purchases, which began on March 9, will continue at least until September 2016 or until the inflation outlook will not come back in line with. target of the ECB (around 2%). President Draghi wanted to pacify the dreaded “scarcity effect”, given the constraints that the ECB has imposed on itself (in particular the 25% limit for each issue); Draghi has in fact argued that about 50% of the securities issued by euro area countries are held outside of the Eurozone, which suggests there is a significant pool of potential sellers, at least initially. As far as I thorny issue of Greece, Draghi said that the ECB is ready to readopt the derogation allowing the ECB to take as collateral Greek bonds as soon as the necessary conditions will return to be, that is presumably not just Greece will begin to implement the measures taken in accordance with the Eurogroup in February.
Corporate bonds: the yield research still supports the sector.
In an environment of high volatility, the month ends positive for corporate bonds. The bonds with speculative ratings, both euro and mainly in dollars, have posted the best relative performance, supported by the positive trend in the equity market and the decrease of the premium for risk. As for the outlook should be noted that the setting of monetary policy of the ECB and the macroeconomic scenario compressed feed rates and this should support the performance of corporate bonds of high quality. The high yield (bonds more profitable but riskier) should benefit delta search for yield linked to the further decline in yields on government bonds. The performance spaces of the latter sector are higher, but at the same time the speculative securities are obviously more vulnerable to a worsening of the geopolitical context.
OPERATING SUGGESTIONS BOND
The meeting of the ECB has introduced some details about PSPP (Public Sector Purchase Program). The acquired securities also include securities with a negative return to the level of the interest rate on deposits held by banks at the ECB, which currently stands at -0.2%. Draghi stressed that the expansionary policy is having a positive impact on the eurozone with an increase in GDP estimates. Estimates on inflation have reported a steep drop for the current year, from 0.7% to zero. The forecast for 2016 was revised up to + 1.5%, while in 2017 inflation is expected to reach 1.8%. Despite the expansionary monetary policy of the ECB favors both the core and peripheral bonds, the minimum level reached by the historical rates of return makes at present particularly high ratings.
Corporate bond sector: in February the risk premium required on sub-investment grade European corporate and high yield has declined. As in the case of the government sector, also in the corporate bond you high valuations make it difficult to search for yield, available only investing extra-long maturities and issuers rated very low, it is recommended not to extend the duration.
Flexible strategies philosophically income: the lowest level of interest rates all major developed areas, default still low and high in the financial system support the diversification of high yield bond exposure. This asset class, you can obtain higher returns than other sectors of the fixed income and similar to those of the stock market but with lower volatility than the latter.
CURRENCIES
USD: Dollar consolidates gains against major currencies, reaching new highs for more than 10 years against euro. The latest macroeconomic statistics, added to comments by Janet Yellen, the Fed Chairman, inducing investors to bet on a rise in interest rates by the Fed called by June.
EUR: following the ECB meeting in early March the euro hit a new low for over 11 years against the dollar, after Draghi reiterated the possibility of continuing purchases beyond September 2016, if necessary. This scenario leaves the door open to further depreciation of the euro.
GBP: Bank of England confirmed rates and the asset purchase program. The first rate hike will move on end of 2015 or as some claim even in 2016. It consolidates in any case the current upward movement of the pound, despite the lengthening of the times of tight monetary policy.
JPY: Japanese authorities appear worried by the slowdown in inflation; if the second half of the year there will be a recovery then it is likely that the Bank of Japan may decide to adopt new expansionary measures in the second half of 2015, with obvious effects of the depreciation of the yen.