Our strongest convictions

our strongest convictions

#1

Soft landing for activity

Recent data continued to point to resilience in the US economy, in line with our scenario of a soft landing. In Europe, growth is likely to remain sluggish. A recession in either the US or Europe does not seem the most likely scenario. The delayed impact of monetary policy and the absorption of excess savings should be offset by the boost to household purchasing power from falling inflation.

#2

Central banks: moderate rate cuts in prospect

Inflation has reached levels close to 3% year-on-year in the US and the euro area at the end of 2023, compared with peaks of at least 9%. Against this backdrop, central banks are likely to begin a rate cut cycle this year. However, they could remain cautious, cutting rates only gradually, particularly in view of persistent tensions on the labour market, which could slow inflation's return to the 2% target.

#3

Overweight equity markets, particularly in the US and Europe

In 2024, equity markets should benefit from the same support factors as at the end of 2023: prospects for lower key rates and inflation, against a backdrop of resilience in the global economy and corporate earnings. We are increasing our exposure to European markets, which are attractive in terms of valuation, and are maintaining our overweight in the US markets, whose economy continues to outperform. We are also maintaining our under-exposure to emerging equity markets, mainly due to the continuing difficulties of the Chinese economy.

our strongest convictions

#5

Maintaining neutrality on the dollar

Changes in monetary policy have been the main driver of currency trends in 2023 and are likely to remain so in 2024. We anticipate near-synchronised rate cuts by the major central banks. We are therefore maintaining our neutral stance on most currencies.

#6

Continued under-exposure to gold

Despite a strong end to the year for gold, partly due to the fall in the dollar and interest rates, we are maintaining our underweight position on the metal, which appears less attractive in the context of high interest rates.

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#4

We remain constructive on government bonds and IG corporate bonds

Bonds continue to offer an attractive carry, particularly those issued by governments and highly-rated companies. Bonds also offer attractive diversification in the event of a shift towards a recession scenario, involving a potentially sharp fall in interest rates and a return to negative correlation between bond and equity market performance.