Volatile markets with selected small

The European equity markets experienced a rocky ride in July. Fortunately, clarification in the Greek saga after tense negotiations allowed for a relief rally, albeit a limited one.

Momentum then started to erode, as new fears arose, among others, the sharp decline in the Chinese equity markets and the recent fall of the currency.

US economic data also provided food for thought, due to good real estate data being followed by less favourable durable goods orders and GDP Q2 figures.

• Recent performances in our Small caps, growth and quality-oriented stock selection were notably good.
• We operated selected moves in our portfolios in the last few weeks.
• For valuation purposes, we sold our positions in European Banks (KBC, BBVA). The sector still faces many uncertainties regarding capital-level regulatory matters.
• We remain positive in the Financial sector on the real estate (slightly reinforced through Unibail) and asset management segments.
• We have added to our Health Care positions, mainly with high-visibility Pharma names like GSK. We have also upgraded our position in HPC through Reckitt Benckiser, Unilever and Ontex.
• In Consumer Discretionary, we remain short on Media and Automobiles and have added to the Luxury goods segment through LVMH and Kering.
• We have also slightly added to our positions in Materials (Johnson Matthey) and cut our underweight in Mining (BHP).
• We have become negative on Industrials as we are bewildered by the lack of Capex in Oil & gas and Mining segments.
• We also remain neutral on the Technology space as in this particularly small sector we do not have any real conviction. This is a case by case segment.
• September and October could see strong volatility on the equity markets, with the risks brought about by a rising USD. Our bias towards Health Care and Consumer Staples could see some benefit.
• Towards the end of the year we might see a cyclicals rally and some sectorial rotation. Small caps could then endure some turbulence.