September has been a relatively good month, largely aided by keeping the exposure to European equities to maximum levels, both in cash and futures. So, while the Euro Stoxx 50 has lead the list of the most profitable indexes for the month, the Spanish index has seen a weigh down due to the referendum effect.

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Global Allocation

On a tactical level, the closeness to the October 1st referendum, suggested us to reduce the risk down to cautious levels, and so we did, completely undoing the futures position over the Euro Stoxx 50 during the last compass of the month.

The overall situation is good or very good, depending from where you look from. It all indicates that equities might be benefited by the general climate, both in the USA, where the data keeps giving positive news, China, which looks stabilized and is even starting to have some problems caused by the strengthening of its currency, Japan, Asia, the emerging countries and especially, Europe due to the economic cycle’s delay against the USA. As of now, it all seems to predict that we will keep having low interest rates during a larger period than the initially expected.

Global Allocation

Nevertheless, on a local level, even with better economic results than in Europe, and even with the more than notable recovery of the main asset, especially noticeable in the Real Estate industry, with YOY rises of up to 20% in Barcelona, the political uncertainty has levied precaution.

We have seen how Spanish public debt suffered significantly the days prior to month end. We  do not see how such an unstable scenario as the one we are into can be managed without causing a hump on Europe’s overall progress. Some Catalonian banks have started to have tacit liquidity problems and the nearness of Banco Popular’s resolution, is not helping either. Against a backdrop of not paying sovereign debt due to Catalonia’s exit, having to respond for the proportionate slice (+20% - 160.000MM€), with no access to the ECB’s QE nor the liquidity lines of its banks, makes it a problem for all of us.

Global Allocation

Difficult, but possible. We will be cautious. Spain’s weight in Europe, with a 120% of foreign debt, is no Greece, of whom we unfortunately still think of.

I don’t believe, or I can’t believe, that we will see Catalan’s changing their own anthem lyrics. Sincerely, the great error of pro-independence has been to choose a moment where the economy has been able to hide, by itself, the embarrassments of the political class in their eager of pro-independence, “grantee” and deficits with no possible solution. It will be, as always, her, who will put everyone in their place.