Les Billets de Monocle

What to do?

11 January 2022

Dear readers, dear investors,

After an exceptional year in 2021 on the markets, during which so many records were broken, it seems to be time to do the math.

The S&P is up 27%, 31% for the CAC40 and 136% for Nvidia (the US semiconductor giant).

All this is even more impressive when you realize that this is the third consecutive year of double-digit returns on the equity markets (a first since 1999): what capital gains to reinvest (a rich man's problem, you might say).

Nevertheless, things seem to be getting more complex as we enter 2022. The Nasdaq is showing an increasingly sharp decline: -6% since January 1 and -8% since its November highs.er janvier et  -8% depuis ses plus hauts de novembre.

What's more, most of its component stocks are down sharply (40% of the index is down 50% over one year).Finally, the famous "insiders", i.e. the management of these companies (surely the people most aware of the "true value of the business") are selling their shares in droves: they have sold $32 billion over the last 6 months against only $95 million in purchases..

With valuations still excessive, an increasingly acidic inflation-rate hike cocktail and a certain warming of the spirits, it seems wise to ask the following question: what should you do in such a context when you are an investor and what are the different outcomes?

In order for the markets to continue their ascent, inflows are needed. However, it seems that all the available liquidity is currently in the system, especially with leverage. It is therefore a market made up of many more potential sellers than potential buyers.

Stagnation? Why not, but given the major changes that have impacted the markets in the last two years, the volatility generated by the retails flows seems to be a well established trend.

A correction? It all depends on its magnitude, but it may be the most coherent scenario. Rising interest rates could prompt investors to sell their stocks and reallocate their portfolios to less risky assets.

In the end, there is no simple answer, but it seems like a good time to look at your allocations and think carefully not about the upside potential, but rather about the downside risk of each of your lines - and to make the necessary changes to cushion the blow in the event of a hard blow.

Have a good evening,
Max

Disclaimer

This presentation is a promotional document. The content of this document is communicated by and is the property of Monocle Asset Management. Monocle Asset Management is a portfolio management company approved by the Autorité des Marchés Financiers under number GP-20000040 and registered with the ORIAS as an insurance broker under number 10058146. No information contained in this document should be construed as having any contractual value. This document is produced for information purposes only. The prospects mentioned are subject to change and do not constitute a commitment or a guarantee. Access to the products and services presented here may be subject to restrictions for certain persons or countries. Tax treatment depends on individual circumstances. The fund mentioned in this document (Monocle Fund SICAV) is authorized for marketing in France and possibly in other countries where the law permits. Before making any investment, it is advisable to check whether the investor is legally entitled to subscribe to the fund. The risks, costs and recommended investment period of the funds presented are described in the KIDD (key investor information documents) and the prospectus, available free of charge from Monocle Asset Management and on the website. The KIDD must be given to the subscribers before the subscription. Past performances are not a reliable indicator of future performances. Monocle Asset Management cannot be held responsible for any decision taken or not taken on the basis of information contained in this document, nor for the use that could be made by a third party. The investor may lose all or part of the amount of capital invested, as the funds are not capital guaranteed.

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