Exposure rates of the Dorval Asset Management Range – 9th April 2021

The world financial markets are embarking on a fresh phase characterized by the materialization of the much-awaited economic boom, firstly in the US and UK, and then in Europe in the coming weeks, all under the watchful eye of a benevolent Federal Reserve – which like doubting Thomas needs to see to believe – and the US administration promoting a new paradigm.

The gradual reopening of sectors most exposed to the effects of the Covid-19 pandemic in the US and the UK is already driving a spectacular recovery in the business climate for the services sector. The world services PMI issued by Markit came out at 54.7 in March 2021, hitting its highest point since early 2018 (cf. chart 1). However, this recovery should further pick up the pace as Europe moves out of the shadow of the pandemic by the summer, so the point of maximum acceleration in the world cycle still lies ahead.


The business climate is now also picking up in services
PMI – surveys with world companies

Manufacturing sector / All sectors / Services sector 
Shutdown of the world economy


Despite this upbeat outlook, the Fed has no intention of changing tack, with members endlessly repeating that they will only look at the facts, not projections or estimates from the various onlookers. According to the central bank, these ‘facts’ comprise substantial further progress on the labor market in terms of the extent, duration and depth of its recovery. The Fed now also monitors inclusion variables, such as job inequalities between Black, White and Hispanic families. In this respect, it has learnt some lessons from the pre-Covid experience, when what looked like full employment – headline unemployment of 3.5% – still failed to push inflation up to the 2% target (cf. chart 2). So the Fed is seeking much greater labor market participation to propel inflation to 2% on a lasting basis.


The pre-Covid experience encourages the Fed to take plenty of time before adjusting its policy
Inflation and jobless rate in the US

Fed’s long-term inflation target / Core PCE deflator
Unemployment rate


This policy is bound to find favor in the White House and at the US Treasury, where Joe Biden and Janet Yellen promote views and programs that break radically with previous decades. They support the return of trade unions, as well as funding for infrastructure plans, social programs and environmental policies by companies and the highest earning households.


For now, investors are more interested in reflationary aspects – reopening of the economy, recovery, investment programs, etc. – than risks for companies, particularly as these risks are difficult to quantify at this stage. However, this context is positive for our SRI approach, which focuses on governance aspects in Europe and the rest of the world. We believe that enhanced governance is the best way for companies to manage regulatory, tax and social changes. In our international funds, a basket of 200 stocks diversified from a geographical and sector-based standpoint and that best reflect our stringent SRI requirements – International Responsible Selection – constitutes the core of our portfolios (cf. chart 3).


Increasing regulatory and tax risk could promote companies with outstanding governance

International diversified and equally weighted basket of 200 stocks, best reflecting Dorval AM’s SRI approach / MSCI World Equal Weighted Index (net return in dollars)
Ratio of SRI basket / MSCI World Equal Weighted Index



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