▶ Major convictions:
– Continuing reassuring inflation figures and major central bank rate cuts,
– No recession or hard landing: global economy is normalizing and companies are delivering earnings and managing their balance sheet
▶ Positioning: a tactical reduction of risk due to inflated valuations in select segments
– Government bonds are unattractive: Central Banks will continue to cut rates, supporting a normalization of the Treasury curve. Nevertheless, with the strong rally seen over the summer, especially in the US, the shortend and long-end of the curve are expensive: reduce duration and favor the intermediate parts (interesting risk/reward). In Europe, some regional divergence will be observed
– Carry is attractive in credit: favor Investment Grade (robust balance sheets, better ability to maintain margin in case of slowdown, decent demand, attractive yields) over High Yield (very low cushion), in both US and Europe
– Although we continue to be positive on EM debt thanks to a decent carry, volatility around the US elections makes us cautious on the Forex component (local debt: favor countries with decent metrics)
– Still slightly positive on equities but tactically reduced exposure on the US (cautious on expensive names, US growth and large caps; favor an equal weighted approach and US value) and Emerging Markets (solid growth but near term pressures from protectionism with the US elections depending on the region). Europe still offers cheaper valuations. While the changing macro landscape is bringing more volatility, the fundamentals of Japanese equities remain resilient: Japan could offer opportunity as a long term play
– Geopolitical tensions and the safe-haven status of Gold induce us to stay positive on the yellow metal, which continues to enjoy strong demand
– Lower interest could notably benefit the Swiss Real Estate market as borrowing costs decrease
Of Note: Money market funds have reached a new record in 2024, which represents potential flows to be invested if the FED continue to cut rates
