Equity indices closed December on a high note (MSCI Europe NR +3.7%, MSCI USA NR +4.7%), with 2023 remaining an excellent year for investors (MSCI Europe NR +15.8%, MSCI USA NR +26.1%). The monetary catalyst unveiled in November has played out over an extended period. Investors are still betting on a reversal in monetary policy in the near future. Rate cuts are expected as early as the first half of 2024. In this context, the yield curve as a whole eased in December, boosting equity indices, particularly small- and mid-cap ones (MSCI Europe Small NR +7.0%, MSCI USA Small +11.3%).
The easing in bond yields has benefited the profile of our funds, which are overweight in the cyclical real estate and industrial sectors, and underweight in the more defensive healthcare and consumer staples sectors. However, this has not compensated for the impact of the bond yields on some of our banks, especially in southern Europe (BPER, Banco BPM, Banco de Sabadell). Against this backdrop, the Digital Stars funds ended the month underperforming their indices. Digital Stars Europe Acc posted a monthly performance of +3.3% compared with +3.7% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended December at +2.7% compared with +3.8% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc posted a monthly performance of +3.5% compared with +3.2% for the MSCI EMU NR.
The portfolio reviews carried out in December were diversified, increasing our positions in the real estate and industry sectors. Among the exits were mainly financials and consumer discretionary stocks. The overweight of banking stocks in Digital Stars Europe is now at 4.5%.
Digital Stars Europe is overweight financials, real estate and industrials. The fund is underweight healthcare and consumer staples.
The UK is still the fund’s top weight at 21.9%, ahead of Italy at 13.7% (largest overweight) and Germany at 12.0%.
Digital Stars Europe Smaller Companies Acc ended up +3.9% in December, vs. +7.0% for the MSCI Europe Small Cap NR. The fund benefited from the rally of the small caps, but was held back in particular by banks, which were affected by the easing of the yield curve, and by industrials.
The monthly portfolio reviews have strengthened our positions in the materials, IT, real estate and food sectors. Sales were mainly in consumer discretionary, industrials and financials.
The portfolio is now mainly overweight in consumer staples, energy and materials, and underweight in finance, healthcare and IT.
The United Kingdom is the biggest country weight in the portfolio and weighs 19.0% (but remains the most largely underweight country), ahead of Sweden at 13.3%, which stands now ahead of Italy at 13.1% (now the largest country overweight).
Digital Stars US Equities Acc USD was up +7.9% in December, outperforming the MSCI USA NR at +4.7% and the MSCI USA Small Cap NR at +11.3%. The outperformance is mainly due to the fund’s exposure to small and mid caps and to value/cyclical stocks, in particular regional banks, personal care products and industrial companies.
The latest monthly portfolio review mainly increased the positions in financials, as well as in real estate and consumer discretionary, and reduced mainly those in IT and industry sectors.
The portfolio is significantly overweight in industry, as well as in banks. The most underweight sectors are IT, media, and pharmaceuticals.
