Introduction
Economic trends differ. Latest figures indicate that the United States economy remains on the particularly strong path it has been on since its exit from Covid. The outlook is for a modest slowdown in activity, with households benefiting from a healthy labour market and falling inflation. Leading indicators for the Euro area and the United Kingdom appear less rosy. Purchasing power will continue to be restrained by past inflation and sluggish wage growth in real terms, while economic policies - monetary and fiscal - are likely to weigh on the growth outlook. China’s post Covid recovery remains subdued, hampered by persistent problems in its real estate sector.
Inflation is moderating. The shocks that triggered the global price surge have receded and inflation continues to decline. Whilst the worst effects look to be behind us, ripples could persist in the economy for some time. As central banks approach the end of their tightening cycle, interest rates are likely nearing their peak. That said, central banks are likely to maintain current levels until they are assured that the ripple effects have dissipated to an extent.
We prefer a healthy balance of equities and bonds, while tweaking regional exposure. We continue to uphold our highly diverse global positioning as it has enabled us to capture the rally in equities since the start of the year whilst retaining some protection against any fresh turbulence. In equities, our preference has shifted to the US market which stands to gain from its strong revenue growth outlook supported by resilient consumer spending. Concurrently, we move to Neutral on European and UK equity markets and remain Underweight emerging markets given their weaker economic conditions.
In accordance with the regulations in force, we inform the reader that this document is qualified as a promotional document. Unless specified, all figures and statistics in this report are from Bloomberg and Macrobond on 30/08/2023, publication completion date.