At a glance
Economics
- US economy loses some momentum, China’s growth stabilizes, consumption-driven upturn in Europe.
- ECB lowers key interest rates at a snail’s pace, Fed expected to follow at the end of the year. Wage pressure remains high.
- Political risks: Trump leads in US polls, shift to the right in snap elections in France could weaken Europe.
Equities
- The stock markets are trading at new all-time highs following the correction in April. US market breadth remains low.
- Small caps in Europe with rebound potential due to economic recovery, M&A activities and inflows.
- Volatile sideways movement expected until the US elections. Short-term support from seasonality in July.
Bonds
- Despite the ECB’s first interest rate cut, the path ahead remains uncertain due to volatile economic data.
- Increased rate volatility and inverse rate structure on both sides of the Atlantic continue to favor duration close to neutral.
- IG segment valued more attractively than high-yield bonds. EM local currency bonds preferred.
Commodities
- Gold defies higher real rates and a strong dollar. ETF, central bank and EM private buying provide structural support for gold.
- Crude oil in summer with tailwind from US travel season. Declining OPEC production cuts increase supply.
- Base metals with potential after consolidation. Long-term demand intact due to decarbonisation and digitalisation.
Currencies
- Opposing forces are currently at work in the euro-dollar exchange rate.
- The widening interest rate differential is weakening the euro, while the economic recovery in the eurozone is providing support.
- All in all, we therefore expect the exchange rate to move sideways until the end of the year.
