Carmignac Portfolio Absolute Return Europe

August was marked by macroeconomic developments rather than company-specific news.

The month began with a risk-off sell-off triggered by the August tariff deadline, followed by weaker U.S. jobs data that raised concerns about a slowdown.

Fed Chair Powell’s dovish remarks boosted expectations for September rate cuts, helping equity markets recover. European equities ended the month up +0.74%.

Sector rotation was a key theme, with investors taking profits from year-to-date winners and shifting into laggards, despite limited fundamental improvement.

In Europe, top-performing sectors included Auto Manufacturers & Component Suppliers, Basic Resources, Food & Beverage, and Healthcare. Technology, Media, Construction, Utilities, and Real Estate underperformed.

The sharp rotation out of year-to-date winners into laggards despite limited earnings improvement posed challenges for our fundamentally driven portfolio, resulting in a negative return.

At the sector level, positive contributions came from stock selection in Healthcare, Materials, and Communications, while Technology, Industrials, and Consumer Discretionary detracted.

Within Technology, profit-taking in semiconductors reflected concerns about the sustainability of second-half growth.

Financials, which had been strong contributors earlier in the year, were relatively muted in terms of alpha generation during August.

Key stock selection winners included long positions in Fresenius (strong Q2 results), Prosus (supported by Tencent), and Prysmian (benefiting from demand for high-voltage cables).

Detractors included SAP, which declined on concerns about AI’s impact on software models, and Relx, which fell due to fears of AI disrupting data-driven businesses.

Market activity in August was largely driven by Q2 earnings releases, with lower liquidity amplifying share price moves.

Looking ahead, September is expected to be shaped by central bank decisions, particularly the Fed’s rate call with macro factors likely to remain dominant.

In Europe, attention will center on the fallout from the French political situation and its impact on long-term yields.

In the UK, markets will be watching government proposals ahead of the Autumn budget.

Given this backdrop, we plan to remain cautious on risk, using hedging tools such as futures and options to help manage potential volatility.