Market Insights
July 2024 Review

• Current international relations are still strained, both in terms of trade and geopolitics (Middle East, Ukraine) and will continue to weigh on sentiment in the short term. US elections are fraught with uncertainty, as are the French next government
• On the macro front, decelerating inflation and lower consumer spending growth are paving the way for further rate cuts in most larger western countries
• Stock markets volatility increased in July but remains low in spread products

Major conviction: we remain confident in our two major convictions

1/ Continuing reassuring inflation figures and major central bank rate cuts,

2/ Global economy is normalizing and companies are delivering earnings and managing their balance sheet. A soft landing remains our scenario

Positioning: ahead of the summer lull and US elections, selectivity should prevail but volatility will offer opportunities

• With rate cuts on the agenda and growth slowing, the situation is very favorable for credit market carry strategies. Sovereign bonds are by far less attractive

1. Political and economic uncertainties lead us to keep a quality bias, favoring Investment Grade over High Yield bonds, which are not offering compelling entry points
2. Favor Investment Grade in the US, despite the tightness of credit spreads (6/7Y
   bracket), as a good alternative to Cash iii/ Favor Capital structure – BBB/BB in Europe (front part of the curve) iv/ Pocket of value in selected local emerging currencies
   

• US elections could induce uncertainties short-term and volatility. Nevertheless, within equities, performance would likely be more balanced in H2 compared to H1 in a context of rate cuts supporting a larger number of sectors