Coffee Break 11/22/2021


  • Facing a steep rise in coronavirus infections and saturation in hospitals, Austria has become the first European country to re-impose a nationwide lockdown. Other countries have also tightened curbs.
  • Chinese leader Xi Jinping and U.S. President Joe Biden met in a virtual meeting, their closest communication since Joe Biden took office last January.
  • China’s industrial production and retail sales beat expectations, as growth continues in spite of COVID-19 flare ups and energy shortages. This year’s annual GDP growth target remains 6%.
  • The Japanese economy contracted by 3% on an annualized basis in Q3. The new government led by PM Fumio Kishida is under pressure to compile a large-scale economic stimulus package.



  • Manufacturing and Services PMI estimates will be released in all major regions as manufacturing activity is still held back amid supply constraints and the service industry is recovering gradually.
  • The euro zone consumer confidence indicator and the German ifo index will shed some light on households’ and corporate’s views in the current context of rising prices and rising infections.
  • In Germany, the coalition agreement is expected to be reached between the SPD, Greens and the FDP. Olaf Scholz might succeed Angela Merkel as chancellor in the week starting December 6th.
  • Just ahead of the Thanksgiving holiday in the US, investors will read the minutes from the recent Fed and ECB meetings.


  • Core scenario
    • We continue to see upside and downside risks for risky assets into year-end.
    • On one side, our central scenario is that the economic recovery will continue, far from being at the end of the cycle (GDP +4.3% in the US and in the euro zone in 2022, +5.5% in China). With loose financial conditions and cautious central banks, “TINA” will continue to prevail in the months to come and support equities.
    • On the other side, durable inflationary pressures could lead to a more brutal tightening in financial conditions and trigger a premature contraction. While it is not our core scenario, one can imagine that this type of anticipation can lead to increased volatility and periods of correction in equity markets.
    • We have to navigate between bullish and bearish risks on equities as volatility has increased since September.
    • We believe that the context remains positive for ex-US equities, value stocks and assets (banks) and short duration on fixed income.
  • Risks
    • Supply side constraints are numerous and will last longer than expected. Inventories remain low everywhere and bottlenecks are weighing on manufacturing output. Lack of commodities, semi-conductors, labour
    • Inflationary pressures result from this: Energy prices in Europe for instance reach record high levels.
    • The growth of corporates’ earnings could be impacted by a slowdown in economic growth or production stoppages forced by an extreme situation of supply tension.


Risky assets are in a balanced context with mixed coronavirus and economic news flow and economic data showing on-going inflation pressures. After a marked slowdown, growth is now expected to pick up in both the US and China. Outside Europe, the improvement in the epidemic situation should allow many economies to continue to reopen, while consumption should continue to be sustained by accumulated savings and a strong support of governments. While inflation should remain sticky, growth could surprise positively whereas more stringent measures in Europe could leave a mark on the recovery.



We expect a more sideways phase with a possible increase in volatility before finding a clearer direction and a continuation of the expansion environment. We are neutral on equities after a very positive performance since the beginning of the year and considering the balance between bullish and bearish risks.

  1. We have exposure to assets related to the post-COVID rebound/recovery
    Neutral equities, underweight bonds, preference for ex-US equities especially Emerging Markets through Latin America equities and China A onshore stocks.
    Underweight government bonds, keeping a short duration. We focus on the source of the highest carry, i.e. emerging debt. We stay neutral US and European investment grade credit. We have a currency exposure to the NOK.
  2. Positive stance on Small caps
  3. Positive stance on Global Banks
  4. Positive stance on long term growth thematics
    Environmental solutions, digitization and healthcare are our strongest thematic convictions. Tech and Innovation themes, as well as Oncology and Biotech sectors reveal high growth potential.