The market

The market is trending down and repricing a more sustainable growth expectation. Risk-takers continue to justify high valuations with the accommodative policy of the ECB.

Our portfolio

The positive performance of our portfolio is favored by our investment policy oriented towards wealth creation. At the beginning of the year, we took advantage of the market weakness to buy an industrial company in diversification process. Unfortunately the proposed merger failed and we realized a 20% gain in two months instead of a much greater long-term potential. The rise in precious metals (which is a positive contributor to our gains) offered us the opportunity to increase our allocation in physical silver. Our exposure amounts now to over 9% of our portfolio. We sold some stocks that more than doubled in the past four years, as their profits margins are currently overshooting their long-term potential. Present stocks valuations are exceeding our wealth creation objectives. Therefore we stay hedged from the market volatility with our puts.

Going forward

The worldwide rate of debt (debt / GDP) is higher than in 2008 and growing steadily. Excessive indebtedness was the cause of the latest crisis and the current strength in leverage is particularly worrying. The return to a more reasonable debt ratio is mandatory to mitigate contagion from future crises. Our cash is increasing and in effect reinforces our defensive stance, which allows us to maintain our performance during contingencies like the Brexit. So to preserve our investment potential we have the requested patience to accept lower profitability going forward.