Editorial - January
The sum of all hazards
Moving into the new annual cycle is a moment to stop and assess the risks that may alter the path of a strategy. It is clear that the continued rise in stock markets, without major blows over the past year, is not the last of the paradoxes. It is an astonishing trajectory at a time when the pandemic has revealed many weaknesses in the organisation of our societies, which are already fracturing.
The mode of operation for several decades has been that of just-in-time flow. There has been little room for learning and improvement over time. The result was an almost total lack of plasticity in our social and economic bodies. This quality could have enabled us to better withstand the shock of the interruption in the ongoing movement of people and goods. If multilateralism was already called into question, the continuation of globalisation and the reduction in production and assembly sites facilitated the synchronised resurgence of shortages when our supply chains first seized up. This has also contributed to an increasing number of challenges related to our governance choices and our dependency strategies.
« It put the public authorities at the crossroads of “knowledge and power”, even as populations were ideologically polarised against uncertainties over contamination and a lack of cooperation between countries. »
What about long-term investors? While the dogmas of monetary and fiscal orthodoxy have been collapsing since the 2008 crisis, it seems that interest rates have bottomed out after 40 years of decline. This long decline has continued with the successive stimulus plans of central banks and governments in recent years. However, the prospect of the monetary authorities halting their purchasing policies creates a risk of a rise in long-term rates and the fragmentation of borrowing costs within the eurozone. This break could occur even as government issues (net of ECB purchases and redemptions) will once again be positive this year. Similarly, the slowdown in extraordinary budget spending should mechanically affect the private sphere. However, the increase in the cost of credit or financial leverage combined with the end of support or guarantee measures is likely to put the weakest players at risk. This trend could surprise the markets, with an acceleration in falls rather than ascents.
Written by
Francis Jaisson,
Managing director, Head of Asset Management, Marketing, Trading and Research
January 25, 2022
Covéa Finance, a portfolio management company of the MAAF, MMA and GMF groups with share capital of €24 901 254, incorporated as a single-person simplified joint stock company, registered with the Paris Trade and Companies Register under number 407 625 607 and approved by the French Financial Markets Authority under number GP 97 007.
This document is produced for information only and cannot be considered as an offer to sell or investment advice. It does not constitute the basis for any commitment of any kind, nor a strategy assessment or any recommendation to invest in financial instruments. It contains general and non-personalized opinions and analyzes designed by Covéa Finance on the basis of figures that it considers reliable on the day of their establishment depending on the economic context, but the accuracy and validity of which are however not guaranteed. The views expressed in the document are subject to change without notice. Covéa Finance cannot be held responsible for any decision taken on the basis of information contained in this document. This document is the intellectual property of Covéa Finance. Any Use (defined below), reproduction or distribution of all or part of this document must be subject to the prior authorization of Covéa Finance. The recipient of this document is aware of and accepts that the quantified data, allowing the establishment of general and non-personalized opinions and analyzes, may be subject to the acquisition of rights vis-à-vis third parties. Therefore, the encrypted data may under no circumstances be the subject of any use by the recipient of the document without the prior acquisition of the necessary rights directly from the third party holders of these rights. Furthermore, the recipient of this document is aware and accepts that Covéa Finance will in no way be responsible for any use made of said encrypted data and will alone assume all the consequences vis-à-vis third parties who hold the rights associated with this data. "Use" is understood as, and without limitation, the manipulation of encrypted data, distribution, redistribution, integration into an information system or into documents of all types.
