Make Europe Investable Again
House Views
February 2025
SG Kleinwort Hambros Monthly House Views February 2025
Our Main Convictions
Economic Focus
DIRECTIONAL VIEWS
Our Asset Allocation *in Detail*
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February 2025 House Views
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Tailwinds beat uncertainty.. European equity markets are off to a strong start this year. This improvement contrasts with the global political uncertainty and the fragility of economic activity in the region. It can be explained by the return of investors - particularly foreign investors - who had largely abandoned the region since the start of the war in Ukraine. They appear to be lured by attractive valuations and the anticipation of supportive factors that could last. Firstly, listed European companies are benefiting from the fall in the euro and the buoyant economic activity in southern Europe and the United States, to which they are exposed. Secondly, interest rates in the euro area are moving further out of sync with US rates. Finally, the US offensive on trade policy could encourage European unity on certain projects, such as defence, artificial intelligence and energy.
…which lead us to reinforce our positive outlook on European equity markets. We continue to favour equity markets, in particular European equities to benefit from their favourable momentum. We favour companies and sectors exposed to US activity, but with limited risks in terms of trade restrictions. We also keep a positive outlook on US equity market, favouring sectors and styles that would benefit from favourable industrial policy and withstand the high-interest rate environment. On the other hand, emerging equity markets could continue to underperform, with China specifically targeted by trade restrictions.
Towards a stronger dollar and yen
The desynchronisation of monetary policies is being confirmed, with a wait-and-see Federal Reserve on the one hand, a Bank of Japan (finally) raising its rates and central banks in Europe continuing to lower theirs. The dollar and yen are likely to benefit from these more favourable interest rate trends. While retaining a clear strategic focus, we are maintaining a highly diversified allocation, with continued exposure to the bond markets (European credit in particular) and gold. In the current political and geopolitical climate, market volatility will remain the order of the day.
Unless specified, all figures and statistics in this report are from Bloomberg and Macrobond on 28/02/2025 publication completion date. Past performance does not prejudge future performance. Investments may be subject to market fluctuations, and the price and value of investments and the resulting revenues may fluctuate downward and upward. Your capital is not protected, and original investments may not be recovered.