2018 outlook from Monaco fund selectors

Thierry Crovetto and Pierre-Yves Dittlot are co-founders, chief executive officer and chief investment officer of Monaco-based TC Stratégie Financière respectively. They unveil their 2018 fund and asset classes bets.

2017 was even better than expected. Growth momentum is still there and offers a favorable perspective for 2018. We expect global expansion to continue in 2018 with slight monetary policy shifts. The US economy still captures the attention with probably more good news coming over the next few months. Corporate tax cuts and the likely new infrastructure spending plan will contribute to boosting growth.

Due to favorable financial conditions and growth momentum, Europe is likely to grow at higher rates than in recent years. Monetary policies remain dovish with many political risks left behind us with the exception of Brexit and Catalan independence claims.

Japan should continue to benefit from global growth though its diverging monetary policy with the US should limit any Yen upsides.

Emerging markets as a whole will also benefit from higher economic growth in developed countries with cheaper equity markets and even higher growth rates.

In the present context with no signs of recession or growth deceleration we keep a positive investment approach, even though 2018 could see the returning of volatility, and believe the momentum will remain unchanged for the first half of 2018.

Equities
Despite a flattening of the US yield curve this year, we foresee it steepening over 2018 together with the peaking of economic growth and the implementation of new US policies in favor of banking deregulation and infrastructure plan spending. Furthermore, growth will also remain driven by technology becoming even more relevant in our daily lives.

European Mid & Small capitalisation companies should take advantage of the environment. Finally, historically low levels of volatility open the door to equity exposure through cheaper call options.

  • Robocap Ucits Fund USD
  • Robo Global Robotics & Automation Ucits ETF USD
  • CPR Disruptive Opp EUR
  • Amilton Premium EUR
  • GEM Equity EUR
  • Call SPX strike 2760 maturity March 2018

Absolute Return
In the current environment of low interest rates, absolute return assets constitute attractive strategies to provide greater diversification. Furthermore, the allocation of absolute return strategies is of greater use than that of bonds due to its wider performance dispersion.

This is the reason we implement absolute return strategies to diversify the sources of performance and diminish risk.

  • Polar UK Absolute
  • Oak Emerging and Frontiers Opportunities
  • Aberdeen Multi Asset Growth
  • LFIS Vision Credit

Bonds
Present rock-bottom interest rates make the process of bond selection much harder. The recent “Steinhoff” example is the proof that even the ECB can select poor candidates in its corporate bond purchasing program. Therefore, we choose to adopt a greatly-diversified and benchmark-free investment approach.

  • PIMCO Income
  • H2O Multi Aggregate
  • GAM MBS Total Return
  • GAM Star Credit Opp
  • Invesco European Loan

Currencies
EURUSD
At short term, USD could increase due to the good news flows in the US. Indeed, we can see additional economy stimulus as banking deregulation and infrastructure spending plan. However, at 12 – 18 months, EURUSD is more likely to increase above 1.20 with a target at 1.25. The divergence between monetary policies will probably decrease due to European growth momentum

EURSEK
This pair has hit news high since 2010. Sweden’s economy and inflation rate are recovering at the same pace or higher than those of the Euro area. Because of this, The Swedish Central Bank is likely to adopt at least the same monetary policy steps as those of the ECB leading to SEK appreciation over the next 12 months.

EURNOK
The fundamentals of Norway’s economy are strong and a stabilisation or an increase of oil prices would provide sustainable growth perspectives for the country and its currency.

Conclusion
Despite an expensive, yet not overvalued market valorisation, we believe momentum growth will continue at the beginning of the new year. We are more cautious about the outlook for the end of 2018 though due to uncertainty and with the good news already having been priced in by the markets.

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