Several macroeconomic themes should animate the year 2021, such as government fiscal stimulus programs in the face of the health crisis, historical political antagonisms in the United States or, again, questions about the outlook for inflation. In terms of investment strategy, the so-called growth European small and medium caps retain Financière Arbevel’s preference.
On the macroeconomic level, the Financière Arbevel team identifies several structuring issues for the quarters to come that must be understood from a long-term perspective. First of all, it is obvious that the “extraordinary” dimension and the vigor of the pandemic call for the greatest humility in the comparative evaluation of economic and health measures undertaken by governments. “At the level of their sovereignty, European countries have pursued different strategies from each other in the face of the first two waves of Covid-19. The results obtained on both sides show that it is very difficult to make a final judgment on the most effective measures, certain devices set up as models last spring being, for example, struggling today ”summarizes Thibault Prebay.
Towards a sequence of lasting political instability in the United States
In the United States, the impact of the pandemic seems stronger than in Europe and a fortiori than in Asian countries: mainly due to an overall more fragile health system, but also a glaring deficit of unity policy at the heart of the divisions between Republicans and Democrats, after tormented presidential elections. “ The health crisis acts as the catalyst for a structural trend: the gradual loss of the economic leadership of the United States, to the benefit of that of China »Affirms Thibault Prébay. The sequence of political excess that the United States is going through, between Donald Trump’s legal agitations and the multiplication of appeals from Republican States to the Supreme Court – a historic situation – should have a fairly lasting impact on the country’s economic prospects.
“Political stability will be a major challenge in 2021 in the United States. Deep and lasting, the divide between Republicans and Democrats has altered the prospect of a coherent and rapidly implemented economic recovery plan. Where the European Union seems to have built a concerted, coherent and effective support system, at the bedside of its economy, backed by monetary support from the ECB which demonstrates its full commitment to refinance the budgetary expenditure of States ”.
A return of the “inflationary” risk: a hypothesis which structurally has little credit
The hypothesis of inflationary pressures in the United States has resurfaced in recent months with the marked depreciation of the dollar against other currencies. This “currency” effect automatically increases the cost of imports for American consumers. However, this is primarily a technical and contextual inflationary factor, the scope of which should remain limited.
From a fundamental point of view, the data still militate in favor of a downward pressure on consumer prices: on a global scale, the demographic trends at work contribute to the atrophy of generational pools, in other words the size of each age group shrinks from that of the previous one. ” This maintains structural downward pressure on inflation “. In addition, productivity increases thanks to the gains generated by the advance of new technologies, making it possible to produce more for less. “The digitization of consumption patterns also contributes to more competition, insofar as the contemporary consumer has all the tools to compare prices. This is another long-term catalyst that reinforces our relatively low inflation outlook, ”explains Thibault Prébay.
Investment strategy: put into perspective the valuation and growth potential of results
The stock markets saw a sector rotation in November, favorable to “value” (or discounted) stocks which outperformed against growth stocks. For Financière Arbevel, this is a movement of “rapprochement” achieved in good part and whose potential is de facto limited for the months to come. “The criterion of valuation has only a temporary or contextual scope if it is analyzed in itself and without any other metric for evaluating the company. The most important remains the fundamental assessment of the dynamics of the company’s long-term profit results, ”believes Thibault Prébay.
In the light of the potential “couple” of valuation and visibility on the outlook for growth in results, Financière Arbevel maintains its convictions for 2021: European small and mid caps remain the preference of the management team. “These segments of the quotation are starting to attract more and more investment flows again, thanks to an overall profit growth potential than in the large cap segment.” What is more, “smid-caps” display a more marked cyclical component than large caps, an attractive factor with a view to a post-covid economic recovery in Europe by 2022. “In short, our investment strategy remains oriented towards small and mid-cap growth stocks, favorably exposed to the cycle and specialized in innovative or high value-added business sectors” concludes Thibault Prébay.