As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.
You can also watch our video update on the Digital Funds range.
Equity indices in Europe have climbed as much since the start of the year as they did last year. The stock market rally that began in September 2022, shortly after the invasion of Ukraine, is extending, and the gain on European indices has been close to +50% for just over 2 years. We are now entering the 3rd phase of this bull market cycle. The first phase (September 2022 > October 2023) was one of relaxation: the global economy was proving far more resilient than anticipated, despite inflation at the time running into two digits. The second phase (October 2023 > December 2024) was the positive consequence of rapidly falling inflation and the imminence of an accommodating monetary pivot by central banks. The third phase, which has taken root since the beginning of the year, is that of the fundamental normalization of the various market segments. This is now the reality for the major European indices, which have just reached their historical average valuation levels. In terms of stylistic compartments, only the “Value” segment is currently at a discount to its historical valuation standards, and its outperformance since the start of the year, which continues a trend in place since November 2020 and the discovery of vaccines, is gradually normalizing the situation. By way of illustration, the Banking sector, which accounts for a significant proportion of “Value”, is still the European sector at the biggest discount to its historical average, apart from the Energy sector (current P/E of STOXX Europe Bank 8.5x vs. a 10.4x average since 2000), despite the sector’s strong performance in 2024 (+26% excluding dividends) and since the start of the year (+23.5%).
After a good January, US indices fell back in February (MSCI USA NR -1.6%, MSCI USA Small NR -5.0%), and are now posting fairly neutral year-to-date performances (MSCI USA NR +1.4%, MSCI USA Small NR -1.5%), and for once, well below European indices (MSCI Europe NR +10.3% year-to-date).
The first steps taken by the Trump administration seem to have thrown a spanner in the works, and this has weighed on the “growth” segment of the stock market, as well as on the small and mid-cap segment. The “growth” sectors communication services (-6.6% in February), consumer discretionary (-9.0%) and IT (-1.7%) weighed heavily, while the value-oriented sectors energy (+3.7%), utilities (+1.5%) and finance (+0.6%) performed well.
Despite some good quarterly releases, investors seem to be turning away from the expensive and highly concentrated major US indices at the start of the year. However, we continue to identify pockets of inefficiency within the US market, which could benefit our active investment approach. By way of illustration, while the MSCI USA is overvalued by 35% by historical standards (PER 21.7x vs. average since 2005 of 16.1x), the small and mid-cap segment is discounted by -3.6% (PER MSCI USA Small 18.6x vs. historical average of 19.3x).
Digital Stars Europe Acc posted a +1.6% increase in February, vs. +3.6% for the MSCI Europe NR.
The fund’s sector and geographical positioning remained favourable over the month. However, the fund’s all-cap allocation weighed in relative terms, as even though small and mid caps (currently overweight) have risen by +4.6% since the start of the year, they still lagged the large-cap segment significantly over the month. The portfolio reviews carried out in February were diversified, mainly increasing our positions in the consumer discretionary (luxury goods) and finance sectors. Among the exits were mainly companies from the industry and communication services (media and telecom) sectors. Digital Stars Europe is still significantly overweight finance (financial services) and industry, and underweight healthcare, consumer staples and IT. The UK remains the fund’s top weight at 25.9%, ahead of Italy (biggest overweight) at 16.2% and Switzerland at 10.3%. With a 4.9% weight, France remains the largest country underweight.
Digital Stars Continental Europe Acc ended February at +2.7%, vs. +3.7% for the MSCI Europe ex UK NR.
The fund’s sector and geographical allocation worked in its favour in February, but the current overweighting of small and mid caps weighed down in relative terms, as even though they have risen by 6.7% since the beginning of the year, they lagged behind the largest caps over the month. The portfolio reviews carried out in February were diversified, mainly increasing positions in finance, consumer discretionary (luxury goods) and materials. Among the exits were mainly stocks in the industry, healthcare and communication services sectors. Digital Stars Continental Europe is overweight in finance, real estate and industry, and underweight in IT, consumer staples and healthcare. Italy (first overweight) is still the fund’s top weight at 19.9%, ahead of Sweden progressing at 14.9% and Switzerland at 13.2%. With a 7.6% weight, France remains the largest country underweight.
Digital Stars Eurozone Acc achieved +0.4% in February, vs. +3.5% for the MSCI EMU NR.
The fund’s sector positioning proved to be well oriented over the month. However, the fund’s all-cap allocation, which currently overweighs small and mid caps, had a negative impact in relative terms, as even though small and mid caps rose by almost 2.9% over the month, they still lagged the large-cap segment. The portfolio reviews carried out in February were diversified, increasing positions in the consumer discretionary and media sectors. Among the outflows were mainly financial and healthcare stocks. The consumer discretionary sector remains the fund’s main overweight, ahead of real estate and finance. The fund is underweight in consumer staples, IT, materials and energy. Germany becomes the fund’s largest weighting at 22.2%, followed by Italy at 21.8% and France at 20.0%. Italy remains the most overweight country, and France the most underweight.
Digital Stars Europe Smaller Companies Acc ended February at +0.9%, ahead of the MSCI Europe Small Cap NR at +0.6%.
The fund’s good performance in relative terms stems mainly from the strong performance of stocks in industry (MilDef Group, Koninklijke Heijmans) and finance (BPER Banca, Banca Popolare di Sondrio). Portfolio reviews in February were marked by increased positions in consumer discretionary, finance and IT. Among the outflows were mainly consumer staples and industry stocks. The portfolio is now mainly overweight in finance, healthcare and industry, and underweight in real estate and IT. The UK remains the portfolio’s largest weighting at 20.4%, ahead of Sweden at 15.9% and Italy at 14.0%.
Digital Stars US Equities Acc USD ended February down -4.2%, vs. -1.6 for the MSCI USA NR and -5.0% for the MSCI USA Small Cap NR.
On the US market, February was not favourable for small caps. Despite a good sector positioning (overweight financials and real estate, and underweight media), the fund suffered from its all-cap exposure and from a correction in some technology stocks that had strongly outperformed in recent months. The rebalancing carried out in February was fairly diversified, with the integration of finance and industry stocks, and the exit of companies from the media and IT sectors. The fund is heavily overweight in finance and industry. The most underweight sectors remain the media and IT.
