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Our asset allocation


2015


 

On the mark :


Equities:

•Overweighting global equities and underweighting sovereign bonds in H1
•Our decision in early March to further reduce the equity weighting, moving to neutral / overweight and then moving to neutral in August while betting on the tactical rebound of October-November 2015
•Overweighting Japanese and Eurozone equity marketsin H1
•Forecasting (May 6) the formation of the domestic stock market bubble in China, before its correction during the summer

Fixed-income:

•As regards sovereign bonds (we returned to neutral in August), our overweight Euro area V.S. USA (excluding currency effects)
•The continued compression of sovereign spreads (despite the Greek crisis), knowing that we had always ruled out the hypothesis of a Grexit in 2015
•Underweightingcredit and bet on the outperformanceof the European market v.s. the US (excluding currency effects).

Other:

•Currency: Our targets (i.e., 1.10 to the euro-dollar and 120 yen to the dollar) were achieved on the whole
•Maintaining the underweighting of the dollar to account for the potential depreciation of emerging currencies

 




Slightly off the mark :



•Remaining neutral on emerging markets equities (we should have been underweight)
•Same remark on commodities (neutral instead of underweight), given that we did not anticipate the plunge of oil prices in late 2015
•Overweighting inflation-linked bonds in the US and Eurozone was not justified in the second half of the year
•We were too optimistic with regard to the Sterling (neutral vs overweight)

 



 

2014

 


On the mark :



Equities:

•The overweighting of global equities
•Our forecast of a 10% increase in the US market (11, 4% over the year)
•Reduced overweighting of global equities in July
•Some tactical choices: overweighting of emerging markets in July/August, overweighting of Japan in local currency in November/December, overweighting of MSCI Chinawithin emerging countries from the begining of August

Fixed-income:

•The outperformance of Eurozone bonds
•The continuation of spread widening between Eurozone and US yields
•The outperformance of emerging sovereign bonds (S1)
•The outperformance of US inflation-linked bonds (S1)
•The outperformance of high yield over investment grade (S1)

Other:

•Underweighting cash
•Overweighting US dollar
•Underweighting euro
•Underweighting yen
•Overweighting sterling until July, then our neutral position from august 2014


 

Slightly off the mark :



•Overweighting (in local currency) Continental Europe equities too early. This strategy started to work in January-February 2015
•The good risk-adjusted overall performance of sovereign bonds
•The good risk-adjusted performance of credit
•Overweighting financials vs. non financials within the creditsegment
•Overweighting high yield over US IG (S2)
•Some unfortunate tactical choices (overweighting the japanese equity market until early March, underweighting Dax in Europe in May/June)
•Our neutral position on commodities

 



 

2013



On the mark :


 

Equities:

•The overweighting of global equities: performance (dividends reinvested) of the world market equities (MSCI World All Countries) was 7.9% in euro
•The overweighting of Japanese equities (hedged): + 32.8% (in euro, dividends reinvested)
•Within the Eurozone, the overweighting of the DAX(4.8% against 3.7% for the Eurostoxx)
•We sent several warning messages about risky assets at the beginning of February (Italian elections), in early April and early May, which proved to be justified

Fixed-income:

•The underweighting of government bonds (which generated negative performance in the 1st half), especially inflation-linkedbonds.
•The outperformance of high yield over investment grade
•The credit neutral position

Other:

•The neutral position on the euro and the dollar
•The weaker yen
•The rising Sterling, as a result of the economic rebound in the UK (but only from March)
•The fall of gold, mentioned in various issues of Asset Allocation and remembered in our alert of 7 May

 



Slightly off the mark :


 

•The overweighting of emerging markets (until early June), as well as currencies and sovereign bonds.
•Concerning the United Kingdom, our overweight during the first half was not justified because of the decline of the Sterling early this year.
•The Sterling rise from the beginning of the year
•Within commodities, the overweighting of metals during the first 3 months of the year (it worked in January and a part of February)

 



2012



On the mark :


Equities:

•The overweighting of global equities
•The overweighting of emerging stocks
•The overweighting of U.S. and U.K. equities and the underweighting of Eurozone equities until the summer
•We sent several warning messages regarding risky assets from the end of February. And we reiterated this message until the Asset Allocation of early August.
•Purchases in Italian building and public works sector from December 2011 to February 2012

Fixed-income:

•The overweighting of emerging sovereign bonds
•The outperformance of high yield over investment grade
•The return on European bank bonds starting from the summer (July)
•The return on peripheral bonds starting from summer (August)

Other:

•In currencies, the overweighting of emerging market currencies (although the increase was very small), the underweighting of the yen and the euro in the first five months of the year (-3% on an effective basis)


Slightly off the mark :


•Withdrawing our warning message only in early September, when we could have done it from the beginning of the summer
•Maintaining our overweight of emerging market equities in Q2
•Upgrading from our underweighting position in continental European equities in early September (reduction of underweight in August) when we could have done it at the beginning of the summer
•Underweighting of government bonds of developed countries (relative to cash) including the underweighting of OATs in the Eurozone
•In currencies, going neutral on the euro only in early September when we should have done it at the beginning of the summer

 


 

2011


Two periods must first be distinguished :



•Before July 28th (editorial of July 28th), our strategy was quite offensive

•Our recommendations were quite correct (slightly positive performance of global equities, positive performance of high yield, outperformance of Dax, rising energy);
•On the credit part, our recommendations were largely satisfactory (overweighting of emerging market sovereign debt throughout the year and German Bunds from the summer, strengthening of TIPS earlier this year, underweighting of PIGS, etc.);
•There were some errors however (overweighting of emerging equities, favoring italian equities).



•After July 28th, we returned to neutral on equities, high yield and cyclical commodities and overweighted cash;

•We were mostly right (moderate decline in equities, cyclical commodities and high yield). Let us add that we overweighted the Bund. We made a mistake, however, in sticking to our overweighton emerging equities.


•From the beginning of the summer, we shifted to underweight on equities in the Eurozone, and it was justified
•We overweighted energy until the end of April (justified)
We were right to underweight the euro, but we were wrong to overweight emerging currencies





2010



Our fundamental picks for asset allocation in early 2010 were largely validated by the facts :


•Continued overweighting of equities throughout the year
•Continued overweighting of the emerging equity market, with the three country picks (right from the January issue), that were very effective in 2010: Mexico, Turkey, and Russia, leaving aside our 2009 picks (China and Brazil)
•Continued overweighting of Dax in Europe
•Continued outperformance of high yield against investment grade in credit
•Idea that the re-pricing of sovereign debt was still ahead
•Potential of gold earlier in the year
•Our preference for German Bunds in government bonds
•Strengthening of bonds indexed to inflation
•Sent at short notice a message of great caution regarding stocks in May and June
•Mentioned the risk of a bond bubble in some segments (September issue)



A few regrets, however :

 

•Early in the year, within developed equity market, we were overweight continental Europe. We returned to underweight in May and June due to the sovereign debt crisis, then we returned to overweight in our "summer strategy” (July and August), adopting a neutral position later.
•Underweighting of government bonds (position adopted earlier in the year, although our preference was for German Bunds in this asset class)
•Underweighting of gold in our summer strategy
•Idea (mentioned at the beginning of 2010 ) of a tightening of spreads between financial and non-financial: it worked in the U.S., but not in Europe.

 


 

2009



Our fundamental picks for asset allocation were largely validated by the facts :

 

•Our return on the equity market in March (called "bear market rally" at first, then only "rally" in May)
•Our preference for credit over equities early in the year
•Our preference for European government bonds over stocks early in the year
•The reduction of sovereign spreads in Europe compared to the peaks early in the year (February and subsequent publications)
•The tightening of long-term spreads between the United States and Germany, and then its widening (in favor of Germany) (all year)
•The belief that long-term rates would remain at a low nominal trending level
•Our preference for US equities at the beginning of the year
•Our interest in gold (March issue and subsequent ones)
•Our interest in emerging markets (Brazil and China in the March issue), confirmed by overweighting of emerging markets
•Our overweighting of emerging sovereign debt (May issue)
•Our overweighting in financial credit (June issue)
•Our overweighting of Dax over Euro Stoxx (September issue)


A few regrets, however :


•We stayed too long in the U.S. equity market (all first half)
•We overweighted investment grade over high yield for too long in credit (first half)

 




 




 


 






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