The European financial crisis is turning into an economic crisis, and although investors' hopes revived after the European summit at the end of June, the question of generating growth has “not been resolved or even tackled”, according to the latest quarterly outlook from Carmignac Gestion.
"In the current context of extremely low interest rates, central banks' intervention should set gold firmly back on the right path and bring with it producers, who have been particularly badly affected by a lack of cost control for more than a year," Carmignac noted.
The natural resources theme has been trimmed from 21.9% to 20.4% of the Carmignac Investissement portfolio. Energy represents 15.5% of the portfolio, while metals account for 4.9%. Innovation has seen its weighting cut from 9.7% to 7.4% through a reduction in Apple following the stock's progress, and the complete sale of the Indian IT services company Infosys.
For the coming quarter, Carmignac expects the euro will continue to fall. "We believe the dollar will appreciate by more than the yen and are planning to manage our exposure to the Japanese currency more actively." Cash assets were increased from 17.6% to 21.4% of the Carmignac Patrimoine portfolio over the quarter.
Although offering a positive contribution over the last quarter, the corporate bond allocation has been cut back slightly. Although credit spreads widened, for the 6.8% of our corporate bonds held in dollar, the contribution from carry and currency appreciation allowed credit positions to deliver positive performance.
Carmignac said it has increased exposure to government bonds. The developed country government bond component has been stepped up from 11.8% to 17.26% of Carmignac Patrimoine's assets. The allocation remains entirely concentrated in investment grade German and US issues.
It noted that the ECB has again relaxed restrictions on collateral eligible for its refinancing operations. More significantly, it announced a 25bp cut in its key interest rate from 1% to 0.75%. "Given the uncertainty weighing on the - probably growing - support that Germany will have to provide in solving the European crisis, we still think US Treasury notes are a safer bet," the firm said.