Exposure rates of the Dorval Asset Management Range – 23rd April 2021

The robust economic recovery has already had a very visible impact on the state of most listed companies. Investors are also keeping a close eye on how this recovery trickles through to the labor market, which will dictate the reaction from central banks.

The earnings reporting season is in full swing, and we can already draw some positive initial conclusions. We continue to see a growing and increasingly wide-based recovery in earnings prospects for world companies (cf. chart 1). These results are in line with indications from monthly business climate surveys – the PMI. Preliminary PMI stats for April point to a quickening economic uptick in developed markets, and this now includes services. This trend should be driven by moves to gradually ease restrictions in Europe over the weeks ahead.


Very broad-based recovery in earnings per share
12-month forward EPS, index and sectors on MSCI World


Infotech / Healthcare / MSCI World / Financials / Industrials goods and services / Energy


Bar any fresh major setbacks on the pandemic front, the world recovery should continue apace. All eyes will be on the extent to which the tourism, hotels, catering and transport sectors can open again. Goldman Sachs has calculated a reopening scale for the United States, which shows very clear progress in March as well as significant remaining potential until full normalization is achieved (cf. chart 2).


Reopening of US economy
Goldman Sachs scale (0-100)


This good news has made no impression for now on the messages from most central banks, which are determined to avoid jeopardizing the current upturn under any circumstances. However, a developed country’s central bank has shifted its position for the first time: the Bank of Canada announced on April 21 that it would cut back its government bond purchases from 4 to 3 billion dollars a week. Despite restrictions on activity and slower vaccine roll-out than in the US, the job market has improved greatly (cf. chart 3). The Bank of Canada does however plan to keep its interest rates at a low until 2023.


Clear progress on the labor market in Canada
has prompted the central bank to scale back its asset purchases

Unemployment rate / Employment numbers


This approach – in terms of both communication and action – is probably a harbinger of the Fed’s future moves with a few months’ advance. However, it will first be crucial to assess the extent of the decrease in jobless numbers over the longer term: the next labor market report from the US will be issued on May 7.


We have slightly trimmed the equity exposure rate in our international portfolios after a sharp surge on the markets since the start of April (sale of futures). However, we maintain our positive main scenario and remain particularly exposed to the theme of reopening for sectors most affected by the Covid-19 crisis.



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