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22/03/2007 -

Investment Strategy, March 2007: The hare, the ostrich or the cat?

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The Investment Strategy sets forth the different asset allocation choices which are implemented in BNP Paribas Asset Management’s portfolios. The investment strategy derives from a running analysis of numerous factors (i.e. the general economic situation, earnings growth rates and financial ratios, assessment of market valuations, technical analysis).

By Patrick Mange, Director Research & Strategy

Surprised? Yes we are! Not by the consolidation of equity markets, which was well anticipated, but by the sudden and brutal way that it began. When near-term risk aversion falls to the very low level we had observed before this equity market shock, “bad” economic, financial and geopolitical news tends to be played down, while good news is exaggerated. But this sort of behaviour changes dramatically as soon as financial winds begin to turn for whatever reason. And just as people tend to have short memories when markets are bullish, they will suddenly start to remember the past when indices start heading downward. Furthermore, this somewhat cowardly behaviour is now exacerbated by traders and investors who must comply with increasingly strict “VaR” requirements and liquidate their positions whether they like it or not.

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Author of publication: BNP Paribas Asset Management

March, 2007