Europe ahead of the US thanks to rotation

Economics:

• Pandemic subsides in US and UK, cautious easing also in Eurozone despite mild third wave
• Biden delivers: rapid progress on vaccines, strong fiscal stimulus, calmer trade policy are good for the world
• Strong growth from spring onwards, monetary and fiscal policy very expansionary, inflation picking up

Equities:

• European equities recently ahead of US counterparts as yields rise. Rapid rise in yields creates volatility
• Interest rate hikes put growth stocks under pressure and the value rotation continues, but is likely to lose pace
• We keep a moderate equity overweight and a more cyclical exposure for the time being. Outlook still positive

Bonds:

• Sell-off in government bonds amid hesitant central banks and good economic data - especially in the US
• Volatility in spreads increases slightly. EM local currency and EM corporate bonds preferred
• We underweight bonds and focus on credit risk and off-benchmark themes. Duration: short

Commodoties:

• Gold suffered from selling pressure from investors as real rates rose and temporarily fell below USD1,700 per ounce
• A restrictive OPEC+, combined with rising demand, provides strong support for the oil price
• Industrial metals continue to offer potential due to structural drivers, even if much is priced in for the short term

Currencies:

• EUR/USD with renewed correction. USD benefits from economic stimulus and rapid progress on vaccination
• The GBP is reaping the benefits of the Brexit agreement and the rapid progress in vaccinations. The exchange rate rises
• Surprising setback for the chronically strong Swiss franc: The currency falls to its lowest value since mid-2019