The blow of the dissolution of the French National Assembly mainly weighed on French stocks (MSCI France NR -6.3% in June), and more modestly on European indices (MSCI Europe NR -1.0%). US indices, meanwhile, continued to rise (MSCI USA NR +3.5%). Is this troubled electoral context likely to throw the global economy off course? In our view, this is unlikely. On the one hand, previous election-related shocks have not had a lasting impact on the trend, as was the case with the election of Donald Trump, the Brexit vote or the rise to power of populist parties in Europe. Furthermore, the scenario in France of an absolute majority for a coalition of the “extremes” seems to be receding, as is the risk of a budgetary breakdown in the Eurozone’s 2nd largest economy. Fundamentals should therefore once again support the equity asset class, once the economic turmoil has passed. The global economic momentum remains robust, the Fed is poised to cut interest rates in the wake of the ECB, and valuations remain attractive, both in Europe and in the United States for most stocks, while the earnings momentum is currently positive.
Digital Stars Europe Acc posted a monthly performance of -2.1%, vs. -1.0% for the MSCI Europe NR. The fund is up +11.6% YTD, beating its index by +2.5%. Technology (ASM Int’l, SÜSS MicroTec, BESI, SAP, ASML) and healthcare (UCB, Ypsomed) were the only two positive sectors this month, both in the fund and in the market, but their underweight and our remaining cyclical positioning penalised the fund in relative terms. The troubled electoral environment weighed on all the small and mid caps, which are currently well represented in the portfolio.
The portfolio reviews carried out in June were diversified, increasing significantly our positions in the consumer staples and discretionary sectors, as well as in IT. Among the exits were mainly energy stocks, as well as healthcare and media stocks. France, already heavily underweight, has seen its weight further reduced.
Digital Stars Europe is significantly overweight industry. The fund is underweight healthcare, consumer discretionary and consumer staples.
Italy (largest overweight) remains the fund’s top weight at 16.0%, ahead of the UK at 15.3% and Germany at 10.4%.
Digital Stars Continental Europe Acc ended June at -2.3%, vs. -1.1% for the MSCI Europe ex UK NR. The fund is up +11.3% YTD, beating its index by +2.6%. Technology (ASM Int’l, SÜSS MicroTec, BESI, SAP, ASML) and healthcare (UCB) were the only two positive sectors this month, both in the fund and in the market, but their underweight and our remaining cyclical positioning penalised the fund in relative terms. The troubled electoral environment weighed on all the small and mid caps, which are currently well represented in the portfolio.
The portfolio reviews carried out in June were diversified, increasing significantly our positions in consumer staples and discretionary, as well as in industrials. Among the exits were mainly energy stocks, as well as healthcare and media stocks. France, already heavily underweight, has seen its weight further reduced.
Digital Stars Continental Europe is overweight in industry, as well as in real estate. The fund is underweight healthcare and consumer staples.
Italy (largest overweight) is still the fund’s top weight at 18.1%, ahead of Germany at 13.3% and Sweden at 10.6%.
Digital Stars Eurozone Acc posted a monthly performance of -3.2%, vs. -2.5% for the MSCI EMU NR. The fund is up +12.8% YTD, beating its index by +4.5%. The fund suffered from its ‘all-cap’ positioning, partially offset by its underweight positions in France and energy.
The portfolio reviews carried out in June saw the integration of finance stocks, as well as materials. On the outgoing side, the media and consumer discretionary sectors.
The media sector remains the largest overweight, ahead of consumer discretionary and real estate. The fund is underweight in consumer staples, utilities, energy and healthcare.
France remains the largest country weight at 21.3%, followed by Italy at 19.4% and Germany at 18.0%. Italy remains the fund’s most overweight country, and Germany the most underweight with France.
Digital Stars Europe Smaller Companies Acc ended up at -1.6% in June, outperforming by +1.8% the MSCI Europe Small Cap NR (at -3.3%). The fund is up +11.4% YTD, beating its index by +6.4%. Positive publications from several of our stocks (XPS Pensions Group, CMC Markets) enabled the fund to outperform the index, despite a few disappointments.
The monthly portfolio reviews have strengthened our positions in the finance and healthcare sectors. Sales occurred mainly in materials and real estate sectors. The weight of Sweden was significantly reduced.
The portfolio is now mainly overweight in industrials, IT and healthcare, and underweight in finance, real estate and consumer discretionary.
The UK (largest underweight) becomes the largest country weight at 17.4%, ahead of Sweden at 15.8% and Italy (most underweight country) at 12.5%.
Digital Stars US Equities Acc USD ended up at -1.4% in June, vs. +3.5% for the MSCI USA NR and -1.3% for the MSCI USA Small Cap NR. The fund is up +9.5% YTD, vs. +14.6% for its index and +1.8% for the MSCI USA Small Cap NR. The excellent performance of the “Magnificent 7” buoyed the index, accounting for most of the fund’s underperformance.
The latest monthly portfolio review mainly increased the positions in the real estate, energy and materials sectors, and reduced mainly those consumer discretionary and finance sectors.
The portfolio is significantly overweight in consumer discretionary and industry, as well as in finance. The most underweight sectors are IT, media and healthcare.
