Banque de Luxembourg's Chief Economist Guy Wagner discusses the latest financial news, analyses the outlook for the financial markets and answers your questions on his blog. Banque de Luxembourg's Chief Economist Guy Wagner discusses the latest financial news, analyses the outlook for the financial markets and answers your questions on his blog. en Copyright Banque de Luxembourg Investments 2019 Banque de Luxembourg Investments Global growth shows early signs of stabilisation Mon, 13 May 2019 09:35:00 +0200 After several months of slowing down, GDP in the United States and in Europe surged ahead of expectations. Uncertainties about the sustainability of this improvement are however numerous. This is the view of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Seven sins of fund management Steve Glod Steve Glod Wed, 06 Mar 2019 10:09:00 +0100 It is well known that achieving above average returns on the stock market, in a consistent way, is not a simple task. At BLI, we are convinced that the premise to achieve this objective is to adhere to a stringent investment methodology and apply it rigorously. But when it comes to everyday decision-taking, things get complicated. One element especially causes problems: the human mind behind the decisions! Manufacturing sector weakness continues to weigh on global economic growth Guy Wagner Guy Wagner Thu, 04 Jul 2019 10:39:00 +0200 In the United States, the deterioration of the purchasing managers’ indices has extended to services activities, while services activities remain astonishingly robust in Europe. This is the view of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Investing in Emerging Markets - Prefer local dominance to global presence Marc Erpelding Marc Erpelding Mon, 22 Jul 2019 08:59:00 +0200 Applying our business-like investment approach to emerging markets often results in identifying locally-dominant companies. In fact, whereas the number of global dominators is limited, emerging markets tend to have many dominant local companies that are highly profitable. These companies have been present for decades in their home countries and enjoy sustainable competitive advantages. While catering to local preferences, they have been building economies of scale, growing brand equity and perfecting their distribution networks. The gulf between the secondary and tertiary sectors has led to economic slowdown Guy Wagner Guy Wagner Tue, 06 Aug 2019 09:55:00 +0200 The global economy continues to be characterised by the divergence between a weak manufacturing sector and resilient services activities. This is the view of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. The global economic slowdown seems to be intensifying Guy Wagner Guy Wagner Mon, 09 Sep 2019 09:00:00 +0200 In the United States, corporate and residential property investments have ceased to contribute to growth. In the eurozone, the lack of any improvement in the manufacturing sector continues to be affected by weak global trade. This is the view of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Now might not be the best time to start a career in asset management Guy Wagner Guy Wagner Mon, 16 Sep 2019 11:30:00 +0200 Being in the right place at the right time --- In every professional career, ‘chance’ plays a key role. The importance of being in the right place at the right time cannot be exaggerated. The asset management profession is a good illustration of this: someone starting to work in this profession in the mid-sixties will have spent a large part of their career seeing equity markets stand still. By the middle of 1982, the S&P 500 index stood at practically the same level as at the beginning of 1966. Since inflation was very high in the 1970s, an investment in that index would have generated a very pronounced loss of purchasing power. During the same period, interest rates rose sharply. From 4.5% in 1966, the United States 10-year interest rate climbed to over 13% at the beginning of the 1980s. It is hard for an asset manager to generate good absolute returns against such a headwind. The global economic slowdown continues Tue, 08 Oct 2019 09:00:00 +0200 In the United States, signs of deceleration were mainly due to soft business investment although consumer spending continues apace. In the eurozone, the situation in the manufacturing sector has deteriorated further, with industrial production in Germany proving particularly weak. This is the view of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Emerging market bonds: an inherently risky choice? Or a means of portfolio diversification? Gina Kogelschatz Gina Kogelschatz Mon, 20 May 2019 11:30:00 +0200 There is a widely held belief that emerging market corporate bonds necessarily imply higher risk for investors. Many investors indeed feel more comfortable investing in their country of residence or close to their home country, as Warren Buffett mentioned in an interview (1). Admittedly, the developed bond markets in North America, Western Europe and in Japan offer a more stable infrastructure: rule of law as well as a well-implemented set of regulations including competition law, company insolvency law and financial conduct supervision. It is only natural that investors have doubts on the trustworthiness of corporate issuers operating in the emerging economies (encompassing Latin America, Middle East & Africa, Central & Eastern Europe and Asia excluding Japan). Global economic growth slows down Guy Wagner Guy Wagner Tue, 11 Dec 2018 10:48:00 +0100 Although the growth dynamic is more robust in the United States than in other regions, activity is weak in the critical automobile and real estate sectors. In Germany, GDP fell quarter-on-quarter between July and September. So says Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Are dividend stocks overvalued? Guy Wagner Guy Wagner Fri, 24 May 2013 10:59:00 +0200 Through their monetary policy, the central banks have created an environment in which investors seeking regular income are obliged to look for alternatives to traditional fixed-income investments. Initially, this caused a run on the more risky segments in the bond universe, i.e. corporate bonds, emerging market bonds and 'high yield' bonds. As money flowed into these segments, prices were pushed up and yields declined. Interest was then increasingly channelled towards equities paying decent dividends. FROM RISK AVERSION TO CAPITAL PRESERVATION (part 2) Ivan Bouillot Ivan Bouillot Tue, 15 Apr 2014 13:58:00 +0200 "Rule #1: Never lose money" (Warren Buffett) From risk aversion to capital preservation (part 1) Ivan Bouillot Ivan Bouillot Tue, 08 Apr 2014 11:17:00 +0200 The terms risk, volatility and return are often linked in finance. This inter-connection has its roots in an academic financial theory on portfolio management that has become widespread in the professional sphere. It uses volatility as a measurement for risk which diverts attention away from the principal risk of any investment: the risk of permanent loss of capital. Competitive Advantage - Inherent to "Business-Like Investing" Marc Erpelding Marc Erpelding Tue, 19 Aug 2014 10:57:00 +0200 Taking the definition from Wikipedia, a competitive advantage occurs when an organisation acquires or develops an attribute or combination of attributes that allows it to outperform its competitors. BL Equities America, interview with fund manager Luc Bauler Luc Bauler Luc Bauler Mon, 11 Feb 2019 15:50:00 +0100 Luc Bauler is managing the American equities fund BL Equities America at BLI - Banque de Luxembourg Investments since 15 years. The investment outlook for the US Equity market remains attractive, especially when companies with major competitive advantages are favored. “Sustainability doesn’t stand still” Mon, 07 Jan 2019 11:01:00 +0100 In its investment approach, BLI - Banque de Luxembourg Investments S.A. regards equity investments as long-term participations in companies. That is why BLI fund managers constantly seek first-class companies that enjoy clear competitive advantages, that are highly profitable, and that are able to generate recurrent free cash flow. Increasing signs of a synchronised global slowdown Guy Wagner Guy Wagner Tue, 08 Jan 2019 10:57:00 +0100 At the end of 2018, global economic growth continued to slow. In the United States, the orders of capital goods ceased increasing in the fourth quarter. The progressive dissipation of the impact of the fiscal stimulus measures is likely to weigh on the growth dynamic of the world’s largest economy in 2019. This is pointed out by Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Investment strategy 2019 Guy Wagner Guy Wagner Tue, 29 Jan 2019 14:06:00 +0100 To some extent, 2018 was a mirror image of 2017 on the financial markets. Twelve months ago, the markets had just ended a fairly exceptional year which saw most indices increase by over 10% in local currency. One year on, the situation is completely the reverse and it is hard to find an index that has not lost at least 10%. Recession risk still low despite economic slowdown Thu, 07 Feb 2019 15:44:00 +0100 Although recent economic statistics continue to reinforce the idea that the global economy is slowing, for the majority of countries, a recession does not appear to be imminent. This is opinion of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Economic growth is continuing to slow in most regions Thu, 14 Mar 2019 09:46:00 +0100 In the United States, both household consumption and corporate investment have recently shown signs of weakness, while the eurozone is seeing a significant divergence between industrial activity and services. This is the statement of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Enduring family businesses Ivan Bouillot Ivan Bouillot Fri, 02 Nov 2018 10:11:00 +0100 “Shareholders should not worry; we take care of the company.” Bonds issued by State-Owned Enterprises in Emerging Markets Gina Kogelschatz Gina Kogelschatz Mon, 22 Oct 2018 08:00:00 +0200 Solvency is a crucial element to take into account in bond investments. How to ensure the payback of your investment in corporate debt? What if the issuer company does not produce enough cash flow to honor its interest payments? Selecting bonds with a financial guarantee is often considered as a means to secure their coupons. In terms of guarantee, support of the national government tops the list. Hence, bonds issued by State-Owned Enterprises (SOE) comprise an interesting asset class. Trade tensions between the United States and China escalate further Guy Wagner Guy Wagner Mon, 08 Oct 2018 11:42:00 +0200 In the United States, the current trade tensions have had little effect on economic growth, whereas in China trade frictions with the United States are starting to have an impact. This the view of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Emerging markets - a look beneath the surface Marc Erpelding Marc Erpelding Thu, 27 Jun 2013 15:20:00 +0200 « If your goal is anything but profitability – if it’s to be big, or to grow fast, or to become a technology leader – you’ll hit problems. » (Michael Porter) As good as gold? Guy Wagner Guy Wagner Mon, 27 Aug 2018 09:00:00 +0200 "We have gold because we cannot trust governments." - Herbert Hoover // "Gold is money. Everything else is credit." - J.P. Morgan Greater budgetary rigour leads to weaker economic dynamic in Europe compared to the United States Guy Wagner Guy Wagner Mon, 06 Aug 2018 09:12:00 +0200 While in the second quarter GDP accelerated in the United States due to the strength of domestic consumption, it slowed down slightly in the Eurozone. Europe’s weaker growth than that of the United States is primarily due to greater budgetary rigour. This the view of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’. Bond Portfolio Management in a low yield environment Jean Philippe Donge Jean Philippe Donge Tue, 17 Jul 2018 09:30:00 +0200 Managing bonds: it's all changed! Once upon a time, you could manage bonds simply by referring to market indices. But historically low interest rates have ravaged the landscape. The methods that worked yesterday have been seriously undermined today, making it even more important to go back to the asset class’s basic principles. South Korea: towards an improving corporate governance? Tanguy Kamp Tanguy Kamp Fri, 29 Jun 2018 09:30:00 +0200 For a long time, Korean businesses have shown a weak level of corporate governance and inefficient balance sheets. Companies’ profitability has been weak leading to an important valuation discount. Mr Moon’s election as President of South Korea last year raised hopes for improvements in both corporate governance and the geopolitical situation (see 06/06/2017 article: “What's so interesting about the Korean market?”). Now, after more than a year of his presidency, what are the indications? Investing in Japan – Crossroads ahead? Steve Glod Steve Glod Thu, 03 May 2018 09:00:00 +0200 Five years have passed since Shinzo Abe became Prime Minister, promising to revive Japan’s economy and end its persistent deflation with his ambitious Abenomics programme. Recently, however, his standing has suffered and his future briefly seemed to be put in jeopardy by his potential implication in the Morimoto scandal. While the scandal is now almost certainly behind us, the dramatic temporary decline in Abe’s ratings show the fragility of his support. Against this backdrop, it seems appropriate to reassess the progress that has been made in Japan in recent years and to raise questions about the future of Abenomics. The return of the volatility on the financial markets Guy Wagner Guy Wagner Tue, 03 Apr 2018 09:05:00 +0200 Volatility has returned to the financial markets. Three subjects which are currently bothering the financial markets (apart from the declarations and decisions of the American president) merit exploring in greater detail: growth, inflation and the Federal Reserve’s monetary policy, as well as the repercussions that some of the potential scenarios could have on different asset classes. Investment strategy 2018 Guy Wagner Guy Wagner Wed, 24 Jan 2018 14:00:00 +0100 As the saying goes: “To know where you're going, you need to know where you are.” So where exactly are the financial markets as we start this new year? To say the least, equity markets enjoyed an excellent performance in 2017. It is hard to think of an index that did not increase by at least 10% in local currency. Expressed in euros, their performance was less spectacular because of the single currency’s appreciation against most other currencies. Few observers predicted this kind of performance a year ago but, with hindsight, the economic and financial environment proved virtually perfect for equities. Brief comment on the recent market turbulences Guy Wagner Guy Wagner Thu, 08 Feb 2018 14:58:00 +0100 BLI - Banque de Luxembourg Investments’ chief investment officer Guy Wagner has published a brief comment on the recent market turbulences. Passively speculating / Thoughtless investing Jérémie Fastnacht Jérémie Fastnacht Wed, 31 Jan 2018 09:13:00 +0100 Since its early days over 40 years ago, “passive management” (can it really be called management?) has attracted an exponential inflow of assets and a proliferation of products, now more than ever before. An era of easy profits? What values does fencing share with BLI’s investment strategy? Wed, 05 Apr 2017 13:35:00 +0200 Fencing shares many values with the investment strategy of BLI - Banque de Luxembourg Investments. Accordingly, we have entered into a partnership with the Luxembourg fencing champion Flavio Giannotte. Winning Strategies for European “Small Caps” Tom Michels Tom Michels Wed, 13 Dec 2017 11:49:00 +0100 Our investment methodology places paramount importance on a company's competitive advantages. One of the tools used to evaluate these advantages is the Five Forces model developed by the American economist, Michael Porter. Investing in the “Sweet Spot” of the US market Henrik Blohm Henrik Blohm Fri, 01 Dec 2017 11:30:00 +0100 The market for smaller companies in the US is roughly the same size as the entire European equity market. Yet, it is often falsely overlooked by investors although mid-caps show the best historical risk-adjusted return profile. We believe they deserve to play a more significant role in investors’ portfolios. A ratio is worth a thousand words Jérémie Fastnacht Jérémie Fastnacht Fri, 17 Nov 2017 09:00:00 +0100 Strong sales or earnings per share growth, consensus beat, attractive dividends, regular share buybacks, big mergers & acquisitions, ... Numerous companies, investors and journalists use all sorts of proofs of value creation. However only one measurement exists: the return on capital employed (compared to the cost of capital). BL-Equities Dividend: a look back, 10 years after launch Jérémie Fastnacht Jérémie Fastnacht Fri, 10 Nov 2017 08:00:00 +0100 The BL-Equities Dividend subfund celebrates its 10th anniversary. The fund’s objective is to achieve long-term capital growth by investing in high-quality companies, while offering a dividend yield higher than the broad equity market. Interview with the two fund managers, Guy Wagner and Jérémie Fastnacht. 10th anniversary of BL-Emerging Markets – Interview with fund manager Marc Erpelding Marc Erpelding Marc Erpelding Mon, 06 Nov 2017 11:30:00 +0100 BL-Emerging Markets is celebrating its 10th anniversary. Launched at almost the worst time possible, the fund has successfully navigated the ups and downs of emerging markets by sticking to a clear investment methodology. The profile of family business is an excellent fit with our investment approach Ivan Bouillot Ivan Bouillot Wed, 02 Aug 2017 08:08:00 +0200 In the current economic and financial context, marked by excessive government debt and historically low interest rates, it is difficult to find investment solutions that offer attractive long-term return expectations with limited risks. It therefore makes sense to focus on the shares of high-quality companies offering the prospect of a decent return. The power of dividends Jérémie Fastnacht Jérémie Fastnacht Tue, 11 Jul 2017 14:15:00 +0200 Over the last 45 years, shares of dividend-paying companies have generated a much higher average total return (price change and dividends reinvestment) than non-payers. In addition, they have been significantly less volatile. Swiss award winner Steve Glod: how to tackle Abenomics in a Japan portfolio Steve Glod Steve Glod Wed, 26 Jul 2017 10:40:00 +0200 After being singled out at Citywire Switzerland Awards 2017 for BL-Equities Japan fund in the category “Equities Japan”, the UK financial magazine Citywire has interviewed manager Steve Glod how he searches for the best investment ideas in his portfolio. Why is the Korean market so interesting now? Tanguy Kamp Tanguy Kamp Tue, 06 Jun 2017 09:00:00 +0200 Of all the Asian markets, the Korean market is probably the most discounted in terms of multiples. Valuation is cheap not only compared to other markets around the world but also compared to its own history. Investment strategy 2017 Guy Wagner Guy Wagner Wed, 25 Jan 2017 15:38:00 +0100 The economic and financial environment is dominated by a host of uncertainties. The unpredictable nature of the new US President and the uncertainties surrounding measures taken by his administration as well as by other governments and the central banks mean that any attempt to forecast the markets is likely to need rapid revision or adjustment. This is true as much for asset classes as a whole as for the potential winners/losers by sector or region. Quick Chat on Brazil : Corruption Allegations Versus Reform Agenda Jean Philippe Donge Jean Philippe Donge Fri, 19 May 2017 15:28:00 +0200 Less than a year after Dilma Rousseff was impeached, Michel Temer, Brazil's actual President, is asked to step down. As his predecessor, he also risks facing an impeachment procedure. How should we interpret this new episode of the Brazilian "telenovela" ? Trump in Washington, what does this mean for emerging markets? Jean Philippe Donge Jean Philippe Donge Tue, 16 May 2017 13:12:00 +0200 How did the bond markets react to Trump’s win over Hillary Clinton? Looking back, how can we interpret the new direction of US economic policy? Citywire Selector quotes fund manager Steve Glod: Japan ETFs don’t make sense Steve Glod Steve Glod Tue, 02 May 2017 16:37:00 +0200 The UK magazine Citywire Selector has interviewed Steve Glod, the manager of our fund BL-Equities Japan, about the facts that Japanese investors seeking safety in indices are missing out on major opportunities in quality companies and mid-caps and that Japan ETFs do not make sense. “What could make Asian companies great again?” Tanguy Kamp Tanguy Kamp Wed, 08 Feb 2017 21:30:00 +0100 After five years of underperformance, the Asian markets finally seemed to have won back investors interest. 2016 was going along nicely until the American elections. Interview de Guy Wagner sur : les valeurs de qualité et les valeurs défensives Guy Wagner Guy Wagner Tue, 17 Jan 2017 15:32:00 +0100 Le site français a publié une interview exclusive de Guy Wagner, chief investment officer de la Banque de Luxembourg, sur les principaux sujets d'investissements en 2017. est le premier site internet de conseils boursiers en France avec 1,5 millions de visiteurs et 30 millions de pages vues. Impact of US elections on the financial markets Guy Wagner Guy Wagner Thu, 17 Nov 2016 08:45:00 +0100 Now that we have a couple of weeks’ perspective – and as we wait for the broad thrusts of his administration to be fleshed out – here are some points that we think are important in relation to the election of Donald Trump.