Equity markets vulnerable to a setback

At a glance

Economics

• US: economy more robust than expected, mini-recession H2 2023 likely, soft landing possible. Upswing 2024.
• Europe: Consumer purchasing power recovering, but headwinds for industry from abroad. Hardly any growth in H2 2023.
• Inflation declining, interest rate peak almost reached. Fed cuts rates early 2024; ECB tightens further, its rates remain high in 2024

Equities

• Equities in June with performance heterogeneity. Cyclicals outperform defensive stocks.
• High positioning makes markets vulnerable to setbacks. Recession risks and falling net liquidity remain risks.
• We maintain our balanced, non-offensive positioning with a moderate underweight in equities.

Bonds

• Duration of sovereign and covered bonds recently hindered performance but will be a performance driver in the future.
• The relative valuation of investment grade corporate bonds is now much more attractive than high yield bonds.
• We continue to be positioned close to neutral in duration with a rising focus on rate duration instead of spread duration

Commodities

• Gold burdened by general risk-on sentiment. Potential without an interest rate cut currently fundamentally limited.
• Oil has stabilised recently thanks to a declining supply surplus. Further production cuts should provide tailwind.
• Industrial metals are pricing in weaker manufacturing. Supply remains tight, however. Long-term upward trend intact.

Currencies

• EUR/USD currently without a clear trend. At the current rate of USD 1.09 per euro, the euro has some room to move upwards.
• The tighter monetary policy continues to give the GBP stability. EUR/GBP is firming at GBP 0.86 per EUR.
• Switzerland has managed to push the inflation rate back below the 2% mark. The CHF remains strong.