Opinion

Luxembourg has witnessed that European integration still has its limits, even when war rages on Europe’s doorstep.

As world markets digested the Federal Reserve’s rate hike and the ECB’s emergency meeting, finance ministers of the 19 eurozone countries met at the EU conference centre on the Kirchberg plateau in Luxembourg and passed on an opportunity to further integrate financial services. Plans to complete Banking Union, first agreed in 2013, are now sent back to the drawing board. 

L’accélération de la chute des cours des actions aux États-Unis s’est traduite par le bond de géant de 75 points de base effectué par le taux directeur américain pour tenter d’endiguer l’inflation galopante. Le fait que la banque centrale va effectivement procéder à ce relèvement inédit a été confirmé dans l’intervalle après la réunion du FOMC du 15 juin.

The global economy is cooling significantly and a large number of countries are at risk of recession. Equity valuations have fallen sharply in recent months, but do not yet reflect a drop in profits. And that is exactly what is in store.

Comme nous l’avions prédit dans notre rapport annuel de décembre, l‹ «inflation» est l’un des thèmes clés de 2022. En mai, l’indice des prix à la consommation a augmenté de près de 9 %, dans la continuité des mois précédents où des hausses similaires avaient été enregistrées.

In the autumn of 1997, both in Europe and the United States, the ten-year interest rate fell towards 5 per cent. This was caused by the Asia crisis, which caused prices to fall worldwide. Falling interest rates and falling share prices were an unusual combination at the time.

Le pétrole et l’inflation jouent fortement les trouble-fête, mais on voit la lumière au bout du tunnel. 

Is private equity, like Amundi’s Chief Investment Officer Vincent Mortier recently said, a Ponzi scheme? Or is there another reason to fear this asset class?

Luxembourg’s private equity business has experienced a boom in recent years as the Grand Duchy’s improved regime for alternative investments helped it benefit from strong growth in global private markets. For professional investors - family offices and pension funds alike - private markets have become an important asset class.

Even before the European Central Bank has ended the current buying programme, ECB members are already working on a possible next programme. If you are still wondering whether the ECB›s policy might look different now that inflation is at record levels, you now have your answer.

Since 1926, the S&P 500 index has fallen by more than 20 percent fifteen times. On average, the index fell 34 percent in seventeen months during such a period. As many as eleven of the fifteen times the market paused somewhere between 15 and 20 percent price decline, just as it is doing now.

Then some of the earlier losses were made up for. On that basis alone, there is a good chance that the fall will continue.  

When it comes to equity valuations, most investors are concerned with the price/earnings ratio. And while that P/E ratio has fallen to just below the average of the past decade, the picture painted by another valuation measure is much less attractive.