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Spearheaded by the US and Chinese economies, the global economy continued to see a V-shaped recovery during the third quarter. However, a number of uncertainties surrounding the sustainability of this recovery remain, conclude Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’.

“The political and monetary authorities’ huge stimulus programmes are the main source of growth, boosting household consumption and encouraging economic activity, especially in sectors that are particularly interest-rate sensitive”, says Guy Wagner, Chief Investment Officer and managing director of the asset management company BLI - Banque de Luxembourg Investments. “In the United States, home sales have accelerated considerably, reaching levels close to those last seen during the 2004-2006 real estate boom.”


Services activities are showing fresh signs of weakness in Europe

In Europe, the manufacturing sector is benefiting from an improvement in external demand on the back of the US and Chinese economies’ stronger recovery, “while services activities are showing fresh signs of weakness as a surge in COVID-19 infections has led to more rigorous social-distancing measures”, underlines the Luxembourgish economist. China is the most dynamic region, although domestic consumption remains somewhat subdued by comparison with its more robust industrial activity that is benefiting from increased public spending on infrastructure.


Fed keeps interest rates unchanged until at least 2023

At the FOMC monetary policy committee meeting in September, the US Federal Reserve confirmed the new monetary strategy announced at its annual symposium at the end of August. Instead of aiming for a maximum inflation rate of 2%, the Fed is now targeting inflation that averages 2% over time, if necessary by letting prices rise for “a while” to compensate for periods of below-target inflation. Due to weak inflation in recent years, the Fed announced in September that it expects to keep interest rates unchanged at the current low level until at least 2023. In Europe, despite the recent strength of the euro, the European Central Bank has not eased its monetary policy any further.


Consolidation of equity markets

After very strong performance in August, equity markets consolidated in September. Having performed particularly strongly in recent months, the US stock market saw the biggest correction. The Stoxx 600 in Europe and the MSCI Emerging Markets also declined. “In terms of sectors, energy and finance lagged the field yet again, despite having already underperformed significantly in the first eight months of the year”, concludes Guy Wagner.

Guy Wagner, Chief Investment Officer

Originally from a family of entrepreneurs in Luxembourg and with a degree in Economics from the Université Libre of Brussels, Guy joined Banque de Luxembourg in 1986, where he was successively responsible for the Financial Analysis and Asset Management departments, then became Managing Director of BLI - Banque de Luxembourg Investments, an asset management company newly created in 2005.

From July 2022 on, he devotes himself exclusively to his role as Chief Investment Officer, to the management of the portfolios and to the management of the team in charge management of the various funds.

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