Charles-Edouard Bilbault
Global Equities Portfolio Manager
"More for less"
Macroeconomic publications and US regional banks turmoil still represent a big market focus in April. US economic data continued to progressively compress, setting market expectations for a more lenient FOMC meeting early May. Chinese data confirmed the start of the post pandemic economic recovery positively biased towards services and travel. Industrial manufacturing data slightly compressed as inventories are being unstacked. Growth factor and risk assets were penalized during the last week of the month in anticipation of May FOMC1 meeting and upcoming earnings. It neutralized the positive momentum built during the first three weeks of April. Software companies and digital asset sector were particularly disadvantaged.
The earnings season started at the end of April with operational leverage and efficiency gains particularly scrutinized. Topline growth guidance revision was generally expected on the downside, especially for more cyclical sectors. Market was pleased with Meta confirming their new “efficiency ethos”. They guided for operational leverage to pay off over the next quarters and new hiring to start back in June. CEO Mark Zuckerberg highlighted two-way synergies between artificial intelligence and metaverse, reaffirming the tech leader convictions in both technological stacks. Mastercard posted higher-than-expected growth on value-added services and cross-border revenue.
Management shared their macro view on softening US consumer data starting to materialize. The payment leader also launched their Artist Accelerator NFT Pass in April. This pass gives access to a set of tools that supports musicians. It fosters technological education of young artists, as the industry is getting more and more digital. Cybersecurity company Wisekey posted better-than-expected margins and reaffirmed their positioning on post-quantum cryptography and artificial intelligence. They reiterated their vision on Web3.
In April, the portfolio seized the opportunity of Chinese market correction to progressively strengthen its exposure to Asia. We marginally bought shares of e-commerce leader logistics company JD Logistics and online video copyright protection firm Vobile Group. Looking forward in May, we expect companies posting positive results with disciplined cost management to be rewarded over the earnings season these next few weeks, as companies will make more for less. At the end of April, equity exposure was 97%2.
Industry news to watch
Announcements by established companies of blockchain based innovations continued to impact various sectors of the economy and enterprise use-cases. Among many others:
LVMH brand Loro Piana announced the delivery of a blockchain-issued certificate for their most prestigious collection “The Gift of Kings”3. Clients will receive a digital certificate for any new purchase of the collection. By scanning the QR code on labels attached to the luxury clothes, customers will have access to the complete product history. The blockchain used is run by the Aura consortium, namely backed by LVMH and Richemont.
Société Générale launched a euro stablecoin5. Named CoinVertible, the token will fasten and simplify the settlement process of securities issued by blockchains in capital markets. This completes the set of digital services Société Générale offers to issuers. Their last digital bond issuance, executed for the European Investment Bank5 last November, was worth EUR100m and realized in partnership with Goldman Sachs and Santander.
Franklin Templeton shifted the transaction processing of their FOBXX money market fund to the Polygon blockchain6. The fund is worth USD275m at time of writing. The fund manager highlights the “operational efficiencies though use of a blockchain-integrated system”. This technological shift will allow the fund “to be further compatible with the rest of the digital ecosystem, specifically through an Ethereum-based blockchain.”
