Economic Growth

Global semiconductor demand will continue contracting, even though the pace of decline will moderate in 2023H2. While demand has increased briskly for Artificial Intelligence-type semiconductors, this will not be enough to lift aggregate global chip sales out of contraction. While momentum could push Emerging Asian semiconductor stocks higher in the short term, their share prices are vulnerable to the downside due to shrinking demand.

It is easy to claim that the ECB is failing in light of today’s elevated inflation readings. Yet, the reality is more subtle and the ECB’s performance lays the ground for stronger growth ahead.

In this report, we follow up on the upgrade to our US duration stance from last week with a review of our rates views and government bond allocations outside the US. We conclude that while we now find US Treasuries to be more attractive from a value perspective, even better value is available in euro area and UK government debt.

Risk assets would perform well over 12 months only if inflation falls to 2% without triggering a recession. That would be unprecedented. We recommend investors stay defensive.