Central banks remain a driver for US markets

Despite the recent strong gains, the profit-taking move that took place in early April was rather light, as the March FOMC meeting minutes published in early April confirmed the dovish stance of the Fed.

While short interest in the US was near all-time highs on concerns about valuation, this profit-taking move did not last long and, rapidly, the market moved higher. Improving China data, the continued upside in the oil price and the release of better-than-expected earnings, particularly by banks, fed a rather global risk-on rally. Persistent weakness in the dollar, a side effect of the dovish Fed stance, also definitely supported the upside move.

There was some further profit-taking towards the end of April as global equities pulled back.

Basic materials and oil-related sectors did particularly well, as oil and commodity prices kept rebounding. Financials were also supported by a rather strong earnings season. The tech sector, however, was affected by a fall in Apple shares after the company announced disappointing results and a decline in iPhone sales for the first time ever.

• Compared to the end of last month, there have been significant changes in our sector allocation.
• Rising commodity prices and good results from Chemicals made us increase our Materials exposure.
• We reduced positions in IT, before earnings, in order to derisk our portfolios.
• We further increased Consumer Staples, , in our search for quality stock, as this sector profits from the decline of the USD versus some LATAM currencies..
• We raised or initiated positions in Dow Chemical, NXP Semiconductors, Johnson & Johnson, Stanley Black & Decker and Pepsico.
• We reduced positions in Alphabet, Apple, Amazon, Gilead and Celgene.
• Currently, our biggest stakes are in Consumer Discretionary, Consumer Staples, Healthcare, Industrials and IT.
• Our largest active positions are: Nike, Pepsico, Accenture and Stanley Black & Decker.
• The IMF expected world economic growth forecast of around 3.2% for 2016 and 3.5% for 2017 seems very challenging in the current environment. But, as we currently observe some early macroeconomic improvement in the US and even in Emerging Markets, we are slowly reverting to a slightly more cyclical stance.