At a glance
Economics
- Moderate growth in the eurozone, additional momentum not expected until 2025.
- The US economy is slowly cooling down and preparing for a soft landing.
- Relatively slow steps expected by the ECB and the Fed on the way down from the interest rate summit.
Equities
- Recession fears, negative seasonality and unwinding of carry trades led to a sell-off in early August.
- Positive economic and central bank signals, share buyback programmes and low volatility led to a rally.
- Negative seasonality and US elections pose risks. Counter-cyclical trading and balanced positioning were favoured.
Bonds
- While a rate cut by the Fed in September is almost certain, the size of the move remains unclear.
- Increased interest rate volatility on both sides of the Atlantic argues for duration close to neutral.
- IG and HY risk premiums recently widened slightly due to recession concerns. EM local currency bonds still preferred.
Commodities
- Gold at all-time high, but drivers have recently turned. Interest from financial investors increases as interest rates fall.
- Crude oil in a solid starting position despite economic pessimism. Negative outlook seems to be priced in.
- Industrial metals suffer from weakness in industry. First signs of strength under the surface, especially in China.
Currencies
- The start of the US interest rate turnaround is likely to weaken the US dollar.
- There could be short-term fluctuations in the euro-dollar exchange rate around the US presidential elections.
- The SNB and ECB moving in lockstep leads to a sideways movement of the euro-franc exchange rate.
