News of the Q 1 -2024

During the first quarter of 2024, market volatility and risk aversion remained very low. What explains this optimism? Since October 2023, investors have been betting on a soft landing for economies with continued disinflation. They anticipate that central bankers will be able to significantly lower their key rates and offer markets a more accommodative monetary framework. This "ideal" scenario is notably supported by Jerome Powell, the head of the Fed.
Certainly, the latest economic statistics describe a slowdown in activity in Europe but without deterioration, and still robust growth in the United States. However, regarding the rapid return of inflation to 2%, this seems more uncertain to us. In the United States, inflation stood at 3.5% in March compared to 3.2% the previous month and 3.1% in January, with core inflation, which excludes the most volatile elements like energy, remaining very high at 3.8%. In Europe, inflation over the same period went from 2.8% to 2.4%, but with core inflation still high (2.9%).
Despite the belief that the "inflation problem" will be quickly resolved, these figures have nevertheless forced markets to revise their expectations for monetary easing. Thus, they now expect 3 rate cuts (of 25 bps) from the Fed and the ECB compared to more than 6 cuts at the beginning of the year.
This has not dented investor confidence, and in this supportive context, equity markets have continued their upward march with double-digit gains for the main indices over the quarter: +10% for the S&P500 and +13% for the Eurostoxx50.
In the bond markets, there is a slight tension in interest rates. Over the quarter, the 10-year US rate rose by 30 bps to 4.20%. The same observation in Europe with an identical increase in the 10-year German rate to 2.30%. In the private debt market, risk premiums are experiencing a significant relaxation.
We still have serious doubts about the realization of the ideal scenario played by the markets. We believe that the return to inflation rates close to 2% will probably require either a more restrictive monetary and financial framework or a recession in the main economies. One could lead to the other. We have therefore maintained cautious strategies with significant liquidity and defensive securities.
We have increased our investments in the commodities theme following the confirmation of rising inflation in the United States, as well as an improvement in global industrial growth. This has mechanically affected commodities. Indeed, they are historically the best protections against inflation. The increase in industrial activity worldwide leads to an increase in demand for commodities, while for many materials, supply remains limited or stable. Thus, for oil, OPEC+ maintains its production cuts which, since early January, are no longer offset by the rise in US shale oil, with the number of wells declining since late December. Oil has thus started a new upward dynamic, and the International Energy Agency now expects a deficit between supply and demand for 2024, compared to a surplus three months ago. We are invested in Total to support this theme.
Copper, which suffers from chronic underinvestment by mining groups over the past ten years, sees its structural demand increase due to the electrification of the energy sector and the rise of Artificial Intelligence (very energy-intensive). We expect a doubling of the price over the next 3 years. Beyond these emblematic commodities, 70% of commodity prices have been rising since the beginning of the year.
We have purchased an index grouping all the main commodities to benefit from this dynamic.
Our MW Actions Europe fund rose by 11.2% over the quarter thanks to its positioning on growth stocks. The MW International Bonds fund fell by 0.2% due to the rise in rates. Our new MW Global Actions fund has risen by more than 10% since its creation on December 12th.
Drafted on 26/04/2024