Remain invested, favor Eurozone – First part

Trumponomics: what has been done?

Not much… so what?

Source: ODDO BHF AM SAS. Data as of 05/31/2017

The discrepancy between hard and soft data in the US remains “to be solved”. The consensus’ central scenario is a rebound in growth to 3% in 17Q2. Distribution of expectations is nevertheless wide
Forward households consumption and saving behavior are key. For some quarters now, they save much more than they should, given their level of net wealth
The pressure on the Trump administration to deliver at least part of its most stimulating reforms could also boost growth
Some sectors like housing or the automotive sector are giving signs that the current cycle is largely mature. The latest employment report also points into this direction


Sources: ODDO BHF AM SAS, Thomson Reuters, Datastream, Bloomberg. Data as of 05/31/2017

As long as inflation does not accelerate, there is no need to speed up rate hike pace
Fed moves towards a pace of 3 hikes per year whereas we had only one between 2015 and 2016. Fed now owns 15% of the Treasuries inventory
The reduction in the size of balance sheet is in sight
Fed’s goal is to avoid a market overreaction with a very progressive way of selling securities (forward caps : 6 billion of treasuries per month initially), but no return to the pre crisis balance sheet
Are US equities prohibitively expensive?
Sources: ODDO BHF AM SAS, Factset. Data as of 06/16/2017
The FCF yield of the US market is at 5% which is by historical standard rather in the low end of the range and very close to the valuation levels seen in 2006/07
Nonetheless, looking at the spread vs the 10-year US bond yield, US equities offer a much more appealing relative value call with a spread below the 10-year average
The low interest rate environment provides support. US equity markets are very sensitive to the future direction of bond yield






Nicolas Chaput
Global CEO & Co-CIO

Laurent Denize
Global Co-CIO

Gunther Westen
Deputy Head of Asset Allocation


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