At a glance
Economics
- Very soft landing for the US economy. China's growth stabilises at a comparatively low level.
- Europe: inventory correction in industry ends at the beginning of 2024, upturn from spring.
- Central banks exercise caution with interest rate turnaround: Fed, ECB and BoE will probably wait until June.
Equities
- Equity markets have continued their strength since the start of the year. US and European equities roughly on a par.
- Bubble comparisons in the US too exaggerated. Further valuation expansion in the US nevertheless limited.
- We are sticking to our balanced positioning. Small caps and broad US equity market attractive once the economy recovers.
Bonds
- Interest rate cut expectations for the Fed and ECB almost halved since the start of the year in the face of stubborn inflation.
- Increased interest rate volatility on both sides of the Atlantic continues to argue for duration close to neutral.
- High yield valuation unattractive, IG fundamentally and technically well supported. EM local currency bonds favoured.
Commodities
- Gold at new highs. Structural buyers, Fed turnaround and low positioning support gold in the medium term.
- Crude oil continues to move sideways. Supply and demand are likely to balance out in the medium term and limit upside potential.
- Brightening economic expectations and supply concerns supported industrial metals across the board.
Currencies
- Since February, the euro has made up some ground against the dollar and franc.
- Further upside potential against the strong dollar if the euro economy recovers as expected in the spring.
- Future trends dependent on interest rate policy – the ECB has signalled that it does not intend to cut rates before June.
