Focus on Echiquier Major SRI Growth Europe | June 2025
The inauguration of Donald Trump as 47th President of the United States, his threats and his numerous about-turns on tariffs set the tone for early 2025. Markets are worried about the impact of this aggressive, capricious trade policy on the US economy and inflation.
In light of this, the investment strategy of Echiquier Major SRI Growth Europe, focused on large cap, high-quality European growth stocks that are leaders in their sector, suffered from the sharp rotation into European value stocks. Since the start of the year it has been defensive sectors such as utilities, banks and telecommunications – where our fund has little or no exposure – that have powered the rise of European markets. These sectors have little sensitivity to trade tariffs, as their footprint is essentially local. By contrast, discretionary consumption, healthcare and technology, where we were structurally overweight in the fund, were particularly badly hit.
Transactions based on the economic outlook
Because of their inflationary effect, the tariff hikes are expected to have a negative impact on US household and industrial confidence, and to restrict the Fed’s leeway to cut interest rates over the course of 2025. In Europe, the European Central Bank’s monetary policy will be more accommodating, supported by a disinflation process that is well under way.
In this environment, we have strengthened the fund’s defensive profile, by raising our exposure to securities such as Allianz, Siemens Healthineers, and Relx. We have also reduced our US exposure, by lightening stocks such as Spotify, Accenture, and Assa Abloy. We also invested in Givaudan, an ingredients specialist. This top Swiss company enjoys a defensive profile, as it is exposed to the resilient sectors of household goods and food products. We have also opened a position in Munich Re, one of the world’s leading insurers and reinsurers. This was done to strengthen our exposure to financial stocks benefiting from a favourable environment of sustainably high interest rates and inflation.
Transactions based on fundamentals
We still favour low-debt companies able to generate free cash flow, in a market climate dominated by interest rates and inflation, which are expected to remain higher than they were prior to Covid, regardless of the real rate of tariffs imposed by Trump.
In addition, the isolationist and expansionist policies of the new POTUS[1] are fostering the realisation that Europeans need to increase their strategic autonomy to guarantee their security in a world that faces mounting international tensions. Since the beginning of the year we have been able to invest in the defence sector, which has allowed us to open a position in Thales, thus obtaining exposure to the inevitable acceleration in defence budgets across Europe.
Investment strategy
Our investment strategy remains unchanged, based on some thirty strongly-held views. Our rigorous selection process favours high-quality growth companies that are leaders in their sector and have visible and recurring revenue streams. Stocks capable of withstanding a contraction in the cycle and with the pricing power[2] to be able to pass on the inflationary effects of US tariffs to maintain high margins.
History has shown us that sharp rotations do not last long. We therefore remain confident of the upside potential for high-quality European growth stocks, especially as the “quality” names continue to trade at a discount in Europe in comparison to other regions of the world.