'There is value among mining companies'
"The gold rush, central bank diversification, and the crisis of confidence over global debt are driving companies like Newmont and Barrick Gold"
3' min read
Key points
- Are there industries that could withstand economic and geopolitical turmoil better than others?
- Artificial intelligence now sets the pace in the markets, but what is the real financial situation of companies linked to this sector in terms of fundamentals? Isn't there an overvaluation risk?
- The companies you find most interesting?
3' min read
The recent fall in the stock markets was an overreaction to the optimism that has characterised the markets for some time, whereas in sector terms the gains in technology are supported by hard data and there is therefore no risk of a speculative bubble. This is explained in detail by Frederic Moeremans d'Emaus manager of Valori Asset Management.
What did you make of such a major stock market crash followed by an equally sudden rise?
The trigger for this movement came from a change in sentiment resulting from excessive optimism in the markets that was not backed up by timely data. By the same token, however, I think the reaction has been excessive. Let me give you an example: the average US unemployment rate over the last 10 years is 4.75%, while the figure for July alone was 4.30, so not dramatic. Furthermore, a very important figure such as the Ism Services (51.4), which indicated an expanding economy, was completely ignored by the market. Instead, this is a signal that should, in my opinion, calm the climate.
And what role did speculation play?
.Certainly important. After the BoJ's rate hike, the carry trade mechanism on the yen abruptly jammed, causing a wave of selling that spread from the Japanese market to all the other listings.
Turning to the corporate side, the earnings of companies in the S&P 500 in the vast majority of cases beat estimates. Poor analyst skills or great management skills?
.This quarterly report also confirms that two-thirds of the US companies that reported earnings show results above consensus (even if at the revenue level the number of companies beating estimates is falling). Although from a numerical point of view, it may seem very interesting, the informative value of this data should be analysed in more detail. In fact, it is not unusual for some companies, despite beating estimates, to give less rosy indications of the future or to have incorporated estimates above the official consensus in their prices, and then suffer heavy losses (see Nike and Micron Technology).
Are there industries that could withstand economic and geopolitical turbulence better than others?
The historical correlation between gold and gold mines leaves me optimistic that the latter can close the performance gap in their favour, and I remain positive on defensive themes in the healthcare, consumer staples, following the sharp contraction in multiples, and utilities sectors due to the impact on demand of artificial intelligence.
