Sector diversification,

Investors, however, refrained from selling the market aggressively as they hoped the European Central Bank would be announcing new easing measures.

In the second half of January, indeed, after years of expectation, hesitation and resistance, the ECB finally embarked upon a large-scale asset purchase programme. All in all, the market reacted positively to the ECB move: the EUR weakened against all major currencies and equities surged.

• Our portfolios remain balanced between quality growth stocks and income-generating cyclicals.
• Our second main orientation goes to USD-exposed exporting companies vs domestic ones
• Within Financials, we have reduced our underweight in Banks to neutral with a focus on retail banking and mainly through names with a certain quality, such as BBVA and Intesa Sanpaolo. We believe the banking sector is showing improving figures and there is no longer any clear reason to maintain an underweight. However, the continuing regulatory reforms still justify the sector discount and prevent us from going further than neutral.
• Separately, we continue to strongly underweight Insurance, as we believe investors are underestimating the impact of long-term interest rates on the sector.
• On the positive side, we remain clearly upbeat on real estate, although we have slightly reduced our exposure.
• Within Consumer Discretionary, we have increased our positive stance on Luxury Goods (Swatch, Richemont), as the outlook is improving. The sector is proxy on consumption in Europe, the US and China, where consumption is stabilising. Also, the sector has quite an attractive valuation from a historical perspective.
• On the negative side, we have slightly reduced our exposure to Consumer Services, which, as a strong USD-call in the market, has become quite expensive. We therefore decided to take partial profit on the sector.
• We remain neutral on Energy and have become neutral on Materials, mainly through increasing our exposure to Chemicals companies (BASF).
• We remain positive on Technology, but only on niche players.
• We have maintained our negative stance on Utilities, which still face regulatory issues and could suffer from a lower-than-normal demand for electricity. Also, investors still have a massive overweight in the sector.
• In the current environment, and taking into account the lowgrowth perspective, companies in which we are invested, and which offer visible growth little dependent on the macro context, will continue to outperform.