Carmignac Portfolio Patrimoine Europe

The equity markets experienced a volatile month in August 2024: despite the ferocity and depth of the sell-off in early August, equity markets were quick to recover, with many indices back at their previous highs at the end of the month. The market's recovery was driven by a shift towards safer assets and a defensive rotation in sectors.

Several forces triggered the sell-off in early August, including weak US macro data which exacerbated expectations for rate cuts, the implosion of the Yen carry trade as well as other technical market factors.

Key inflation figures released in August indicated a reduction in inflationary pressures across Europe.

Government bond yields fell as expectations of interest rate cuts grew, particularly in the U.S. but also in Europe. This reflected the market’s anticipation of a more accommodative monetary policy. Unlike equities, the credit markets showed minimal reaction to the mini-crisis at the beginning of the month

Gold also rose, reaching new highs. Meanwhile, major currencies such as the euro, pound sterling, Swiss franc, and yen continued to strengthen against the dollar

The Fund's performance was positive over the month, outperforming its reference indicator.

Our defensive stock selection performed well, with Healthcare and Consumer sectors leading the way.

During the high volatility episode at the beginning of the month, our volatility options paid off, and we sold part of them to take some profit.

Our bond portfolio was once again bolstered by credit. However, our low duration prevented us from fully capitalizing on the decrease in interest rates.

We anticipate a weak but steady growth into year-end in Europe, with slowly encouraging price developments thanks to further wage deceleration amidst softening labour market.

The US economy is slowing down, but there's no need for the Fed to panic just yet. We believe the soft-landing scenario is still on track, thanks to the strong wealth effects from the equity and housing markets, as well as a healthy corporate sector.

In light of the absence of an imminent recession risk in Europe and further support from the ECB, we focus our European Fixed income strategy on selective credit exposure which still offer a historically attractive carry. However, spreads are currently tight as a consequence we counterbalance this allocation with a decent exposure of credit protection.

As European growth remains weak, we generally maintain a focus on stocks and sectors with strong visibility on sales and profits.