Carmignac Investissement: Disruptive thematic

Points to bear in mind following this black swan event on equity markets?

1. This health crisis has highlighted the fragile environment of the equity market.
The years of exceptional monetary policies have, by crushing volatility, led investors towards risky assets, and consequently made them more vulnerable. Therefore, the shock created by the sharp fall in demand led to an indiscriminate decline in the equity markets.

2. The large measures announced cannot claim to be driving an economic recovery.
While central banks and governments have, through their announcements, calmed the markets, these measures are more of an income replacement than a stimulus. The negative impact of this crisis on the economy and corporate earnings, especially due to its duration, could be much greater than what is priced into the market.

3. Beyond the impact on earnings, two equity market drivers will be weakened.
The dynamics of corporate share buybacks, the main driver of the US equity market in recent years, have changed. Most of them have already been cancelled. Also, some companies, particularly in Europe, have been forced to cancel their dividend payments.

4. This crisis will have a more structural impact, particularly on consumption patterns.
These new habits, adopted in these exceptional circumstances we are experiencing, could lead to an acceleration of structural trends, such as digitalization. In the coming months/years, these disruptive trends could benefit sectors as diverse as distribution, including food, health or entertainment, and video games.

Disruptive thematics at the heart of Carmignac Investissement

Given this very unstable growth environment, we have concentrated the equity portfolio on companies with growth profiles that are not very sensitive to the macro-economic environment. These companies can mainly be found in the technology, healthcare and consumer sectors.

We are trying to take advantage of the indiscriminate decline in equity markets to strengthen our positions. On the other hand, ‘cheap’ does not necessarily mean ‘attractive’. Therefore, we are focusing only on the most robust companies, as the environment will remain very fragile in the coming months.

Our core portfolio remains exposed to disruptive themes linked to changes in habits, some of which have been accelerated by the lockdown: