Exposure rates of the Dorval Asset Management Range – 1st April 2021

The $2.25 trillion Biden plan announced these past few days still needs to be fleshed out and – more importantly – it also faces debate in Congress. However the stimulus package clearly bolsters the growth outlook for the US economy, which has already embarked on its recovery. So with the restrictions imposed to tackle the pandemic gradually coming to an end, all lights are now on go.

US consumer confidence took a major upturn in March, coming out at 109.7, its highest point since March 2020. This Conference Board survey is particularly insightful as it also sheds some light onto US perception of the labor market, with individuals feeling that jobs are admittedly slightly harder to get than before Covid, but the difference is no longer so great. This trend does not yet show through in job and jobless figures, but these numbers are difficult to interpret due to furlough programs that are still ongoing in some sectors. If household perception ends up being a better indicator of the real situation than job statistics, the US economy could soon revisit the near full employment it enjoyed just before the Covid-19 crisis broke out (cf. chart 1).


Is the ‘real’ jobless rate in the US already below 5%?

Jobless rate (RHS) / % of households that believe that jobs are hard to get (consumer confidence survey LHS)


This is the million-dollar question. If unemployment drops off swiftly by the fall, this will prompt investors to speculate on the timing for the Federal Reserve’s tapering of its asset purchases, and cause them to expect the date of the first hike in short-term rates – still slated by the Fed for 2024 – to be brought forward. Conversely, slower progress on the job front would ease the atmosphere on the bond markets. In any event, US job stats should be closely followed from here on in.


In addition to the Biden plan’s ambitious dimensions for economic growth, it also reverses the lion’s share of the previous administration’s priorities. Firstly, Joe Biden is setting out to align with the rest of the world as he seeks to develop a greener economy and – trying to convince the unconverted – champions the importance of being competitive compared with China in this respect. However, Corporate America’s comparative advantage is to be dented on the tax front with plans to hike the corporation tax rate from 21% to 28%, along with a number of other tax provisions (cf. chart 2). This aspect of the Biden plan is already hotly contested and may be amended. However, part of the tax cut waved in by Donald Trump in 2017 will still no doubt be challenged. It is worth remembering that this tax cut played a role in Wall Street’s outperformance in 2018. While other factors also obviously influence relative performances, this change could incite investors to broaden their horizons and look beyond Corporate America.



Is it the end of a long period of tax cuts for US corporations?

Effective tax rate for US companies (national accounts)
Corporation tax as a % of federal state’s revenue


Despite the extension of lockdown measures in France, we have significantly increased our exposure rates in our European flexible funds. The decline on the euro, the resilience of both the economy and the stock-market in spite of restrictions, and the expected acceleration in the vaccination program all give cause for assurance. In our Global Convictions funds, recent events validate our positioning on global themes related to green deals and the reopening of sectors hardest hit by the Covid crisis.




Download the weekly letter in PDF version: Exposure rates of the Dorval Asset Management Range – 1st April 2021


Let us provide you with a customized discovery by giving us some clarification.

Choose your profile