Our main convictions

Our Main Convictions

#1

Economic trends positive but a mixed global picture

Growth trends in the world’s major economies continue to diverge. The United States has shown some modest signs of slowing lately but the economy should remain dynamic. In Europe, falling inflation seems to have nurtured some green shoots of growth, which could be further encouraged if monetary policy is eased as expected. Finally, in China some economic indicators have perked up slightly, even though domestic demand should remain weak for some time yet.

#2

Central banks: heading for desynchronised loosening

Doubts continue to hover over US price trends but in Europe the downward trend in inflation seems firmly entrenched. As a result, the European Central Bank (ECB) should be the first mover in the policy-easing cycle, starting at its June meeting, with the Bank of England (BoE) close behind. The Fed is more likely to hang on until Q3, waiting for a confirmation of a durable taming of inflation. In all three cases, though, we expect only modest reductions in 2024, with three cuts by the ECB and BoE and just two by the Fed.

#3

Overweight on European and US stocks and adding emerging market equities exposure

Corporate America has been posting strong results amid a buoyant economy and we are therefore keeping our Overweight position on US equities. We also retain our Overweight to European and UK markets, which stand to gain from the current economic rebound and their attractive valuations. Everywhere, the prospect of rate cuts will give markets additional support. Finally, we have upgraded emerging market equities to Neutral, mainly on their recent strong momentum and cheap multiples.

Unless specified, all figures and statistics in this report are from Bloomberg and Macrobond on 17/05/2024, 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.

our strongest convictions

#5

Overweight US Dollar versus European currencies

Unless something unexpected happens, the ECB looks set to trim rates in June, followed by the Bank of England in June at the earliest (August at the latest). However, the Fed is likely to hold fire until September at least. The mismatch in the timing and number of rate cuts should bolster the US dollar against European currencies. We are therefore maintaining our Underweight on the EUR/USD and GBP/USD, which means we are Overweight the dollar.

#6

Still Underweight gold

Gold prices, since hitting a historical high in mid-April, have been yo-yoing since. The year-on-year performance however remains excellent thanks in large part to heavy buying by central banks and geopolitical tensions. We nonetheless remain Underweight an asset that pays neither interest nor dividends in a world of high interest rates.

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#4

Still constructive on sovereign and investment grade corporate debt

Bond markets continue to profit from their attractive carry and looming rate cuts. The sovereign bonds safe-haven status may also play a favourable role in the current geopolitical climate and should recessionary pressures re-emerge. Even so, our economic scenario – sustained growth in the United States and a small bounce-back in Europe with only modest rate cuts – suggests there will be no great squeeze on bond yields. We therefore remain Neutral on fixed-income markets.