Our main convictions

Our Main Convictions

#1

Holding our positions despite uncertainty and market volatility

Following the announcement of the early elections in France, some markets could remain volatile. However, we believe it is preferable not to overreact to political news, which generally have a limited impact on financial markets. In fact, the fundamentals suggest it is time to maintain our exposure to risky assets in our allocation. What is more, our portfolio remains diversified, the most resilient stance for troubled times and one that has proved itself in recent episodes of turbulence.

#2

All regions are growing but at very different speeds

Growth trends in the world's major economies continue to diverge. The United States has been showing signs of a modest slowdown recently, but the economy looks set to continue performing strongly. Meanwhile, in Europe, the economy seems to be mounting a modest rebound, thanks to the fall in inflation, which should be sustained by the monetary easing. Lastly, in China, economic data show a slight improvement, but the country is likely to remain plagued by lacklustre domestic demand.

#3

Central banks: rate cuts out of sync

Global inflation is on the way down in the leading developed economies, albeit more slowly than hoped. With economies still sound, central banks can afford to tread carefully in cutting rates. The European Central Bank (ECB) has made a start and is likely to put through two further cuts before the year is out. The Bank of England (BoE) followed by the US Federal Reserve (Fed) should follow suit with rate cuts in H2-24. Nevertheless, we are expecting no drastic reductions from any of the three in 2024, with just three rate cuts by the ECB and two for the Fed and the BoE by the end of the year.

our strongest convictions

#4

Overweight to European and US equities, neutral on emerging markets

Given the strong corporate earnings in the United States and its robust economy, we remain Overweight US equity markets We also remain Overweight European markets which stand to gain from the ongoing economic rebound and from attractive valuations. The prospect of lower rates will further help spur all these markets. Finally, we are Neutral on Emerging Market equities, mainly on grounds of their attractive valuations.

#5

Positive on sovereign and top-rated corporate bonds

Attractive carry and the prospect of cuts to policy rates continue to support bond markets. Sovereign bonds may benefit from their safe haven status in the current geopolitical situation or should recessionary risks emerge. That said, our economic scenario – sustained growth in the United States and a modest rebound in Europe with only modest rate cuts – does not suggest a sharp squeeze on bond yields. We therefore stand by our Neutral position on bond markets.

#6

Overweight dollar to European currencies

The desynchronisation of rate cuts between the Fed and the European central banks (ECB and BoE) should continue to support the dollar. Thus, we remain Underweight the EUR/USD and GBP/USD.

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Unless specified, all figures and statistics in this report are from Bloomberg and Macrobond on 13/06/2024, 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.