Investor relations blog

Thanksgiving turkey

Last Thursday US financial markets were closed to celebrate Thanksgiving Day also often referred to as Turkey Day. As the name suggests, Thanksgiving Day is a holiday celebrating and giving thanks for the harvest and other blessings of the previous year. During the Thanksgiving dinner, many families observe the ritual of going around the table to express what each member is thankful for while enjoying the traditional Thanksgiving turkey. The Thanksgiving turkey not only plays a pivotal role in the traditional Thanksgiving celebration but it is also used to illustrate the infamous black swan theory. The idea of a black swan event was introduced by the finance professional turned writer Nassim Taleb after the results of the 2008 financial crisis. A black swan is an event or occurrence that deviates beyond what is normally expected of a situation and is extremely difficult to predict. So black swan events are typically random and unexpected but can have catastrophic ramifications. Therefore, it is important for people to always assume a black swan event is a possibility, whatever it may be, and plan accordingly. Taleb’s Black Swan Theory is illustrated by the life course of the Thanksgiving turkey. From the turkey’s point of view, life is predictable and stable, with daily feedings and care by the farmer. But then Thanksgiving rolls around, with a big surprise the turkey couldn’t have foreseen from its lifetime experience. Thanksgiving dinner is the turkey’s black swan. Taleb states that a black swan event depends on the observer. What may be a black swan surprise for a turkey is not a black swan surprise to its butcher; hence the objective should be to "avoid being the turkey" by identifying areas of vulnerability in order to "turn the Black Swans white”.

Last trading week equity investors did not a lot to be thankful for as global equity markets tumbled on growing concerns over the US-China trade dispute, global economic growth and corporate earnings in Europe, US and Asia. Also, on a year-to-date basis, so far the balance isn’t looking that positive as almost all major equity indices show a negative year-to-date performance. However, equity investors should perhaps not immediately despair as apparently Turkey Day has a way of increasing investors' appetite for equities. According to data compiled by Bespoke Investment Group, investors tend to ‘gobble up’ stocks and push prices higher from the end of Thanksgiving week through year's end.

Last week Ageas also received some important news when rating agency Standard & Poor’s (S&P) increased the rating of the holding company, Ageas SA/NV by 3 notches from BBB to A stable. The last time that a 3-level upgrade was given to a company in the insurance sector, happened more than 20 years ago in June 1998 when Generali jumped from A to AA. The rating upgrade is expected to have a profound impact on the group as it enables further strong development of the reinsurance operations at the holding level, and it creates financial flexibility and enhances capital fungibility within Ageas.

At the end of the last trading week the Ageas share closed at EUR 42.87 or -3.1%.