At a glance
Economics
- US economy: soft landing ahead, new momentum in the second half of 2024. China slowly stabilising.
- Europe: economy at low point; inventory correction in industry ends at the beginning of 2024; upturn from Easter.
- Inflation declines; interest rates peak. Fed cuts interest rates from spring 2024; ECB eases later and more cautiously.
Equities
- Equities rally strongly in November. Small caps, cyclicals and interest rate-sensitive stocks were clearly ahead.
- Further potential limited after strong movement. Late effects of the tight interest rate policy continue to make markets vulnerable.
- We continue to feel comfortable with the reduced equity underweight. Small caps more attractive again as the economy recovers.
Bonds
- A further decline in yields on safe government bonds in view of hopes of interest rate cuts and a cooling economy.
- Increased interest rate volatility on both sides of the Atlantic continues to argue for duration close to neutral.
- IG inflows remain positive for the year, HY – almost unchanged. Emerging market local currency bonds still preferred.
Commodities
- Geopolitics and falling real interest rates boost gold. Only a turnaround by the central banks offers further potential.
- Demand worries have recently outweighed supply risks. After a strong rally, crude oil only has potential again in the medium term.
- Industrial metals remain sensitive to the economy, but the decarbonisation trend is supporting the price trend.
Currencies
- The USD remains strong due to the geopolitical crises, among other factors. Inflation data recently caused some movement.
- EUR/GBP countermovement. The EUR has to accept a setback, also due to the euro inflation data.
- After an interim recovery, the euro has fallen back below the 0.95 mark against the franc.
