In his latest market comment, Guy Wagner, chief investment officer of Banque de Luxembourg, stressed the general trend of a slowdown in profits seems to be continuing despite the corporate earnings season produces fewer surprises.
“The main support for the equity markets is the lack of alternatives, even though the deterioration of economic fundamentals is of increasing concern”, the managing director of the Banque de Luxembourg Investments commented.
He outlined a notable divergence between regions’ performance in recent weeks, highlighting a slowing GDP growth in the US due to weak investment and exports and China’s GDP climbing.
“However, the stabilisation of China’s economy is once again due to the government’s stimulus measures which are exacerbating the country’s excessive debt problem”, Wagner said.
According to him, economic growth is stable in Europe despite a host of political crises and the economic recovery of Japan through the Abenomics plan has not yet materialised.
Commenting the current fixed income environment, Wagner said that “in Europe, the main attraction of the bond markets, despite their weak yields, lies in the prospect of interest rates going deeper into negative territory and this being implemented on a greater scale by the ECB during 2016.
“In the United States, the higher yields on long bond issues give them some residual potential for appreciation without having to factor in negative yields to maturity”, he added.