No major changes on the macroeconomic front last month, but, rather, a confirmation of trends that we had already factored into our asset allocation. However, we did spot several key points:
• Economic growth remains solid in most countries and continues to be driven by domestic consumption but this time with a slight uptick in investment (particularly in the United States, the Eurozone and Japan) and foreign trade (mainly in Asia). We have been keeping an especially close eye on Brazil and Russia, two countries that we have overweighted for some time now. Last month strengthened our conviction. Not only have both countries continued to emerge from a recession in the past months, but inflation is retreating, giving central banks even more leeway to support economic activity.
• The Fed is once again preparing the markets for a rate hike, most likely in March. It will no doubt tighten its monetary policy twice in 2017, and for the first time since the financial crisis, it will be in line with its dot plot, not because it is accelerating the pace of its rate hikes, but simply because it has revised its rate-hike ambitions drastically. We are very far removed from the phases of monetary normalisation of February 1995-February 1996 (300bp in one year) and June 2004–June 2006 ( 425bp in two years, or 25bp every six weeks).