Market Commentary April 2023
The day will come when Democrats and Republicans will no longer agree on the debt ceiling in the United States. Both parties are positioning themselves in the debate for the upcoming presidential election next November and seem to be ignoring all the risks involved.
The main danger of a protracted default is not the plunge of the U.S. economy into a deep recession with sharply rising unemployment, but the risk of destabilizing the capital markets, the already troubled financial institutions and thus the global financial system.
Never since World War II has interest expense been as high as a percentage of economic output, and never before has the U.S. government budget been so heavily indebted. The U.S. debt mountain has now swollen to 120% of GDP.
That is why - not surprisingly - the Americans have moved up to third place just after Greece and Italy in the ranking of the premium for insuring credit default risks, leaving countries like Spain and Portugal behind.
The prospect of job losses and above-average increases in consumer goods prices would very likely cost the Democrats the presidency. So, it's no coincidence that, according to Bloomberg, just 38% of Americans would vote for Joe Biden today, while 44% would vote for Donald Trump.
What this would mean for the rest of the planet, we have already witnessed in the years between 2016 and 2020.
Holdings
Fresenius Medical Care AG, the dialysis specialist from Bad Homburg, delivered the largest performance contribution over the last month. The reduction in the sell recommendation from 31% of all analysts to 26% and the increase in the buy recommendation from 14% to 17% were accompanied by a 13% rise in share prices. Since last October's low, the stocks have gained 68%.
Ongoing profitability improvements and an emerging operational turnaround at H. Lundbeck A/S underpin the healthy growth prospects of Lundbeck's strategic brands. The stock trades at a 2023 P/E of 9x, whereas the average P/E since the beginning of 2004 is over 17x (12%). Since the beginning of February, the shares of the Danish biotech company (specializing in psychiatric and neurological disorders) have risen by 43%.
Bellway Plc shares rose 10% on the prospect of a funding program for first-time owners in the UK. Since the low in mid-October last year, shares of the UK property developer have risen by more than 56%. However, in our opinion, the shares are still undervalued.
Despite slightly more positive stock recommendations by analysts, the shares of the Belgian telecom provider Proximus SA were not yet able to convince investors. They closed the month with -5%.
The reported profits of Repsol SA were also not convincing. The shares lost 6% over the month.
After a sensational performance of DS Norden A/S shares of more than 300% (incl. dividends) since the beginning of last year, the downgrade of the share by SEB Bank has now led to profit taking (-8%).
Please do not hesitate to contact us if you have any queries regarding the fund.
Sincerely
Your CIIM Team
