Sectors

We close our overweights to Energy and Aerospace & Defense. The macroeconomic backdrop is deteriorating for Energy. As for A&D, the good news is already priced in.

The ECB is now firmly in easing mode, even if it refuses to pre-commit to a specific rate path. What does this data dependency mean for the euro and European yields?

The US economy remains on a path towards a recession, most likely starting in late 2024 or early 2025. For now, investors should maintain a benchmark allocation to equities, but employ a barbell strategy of overweighting defensives and materials.

The long-term winners from the generative-AI gold rush are unlikely to be the ‘picks and shovels’ stock Nvidia or the overvalued US superstars of Web 2.0. We discuss the structural investment implications. Plus: time to go tactically overweight global consumer discretionary (RXI).

European stocks have massively underperformed US ones since the GFC. Demographics and productivity say this trend will continue, but is that really so?

Generative AI-related rally resumed in May. Much of the recent market gains are down to excess liquidity that was begotten by the massive pandemic stimulus, creating a dichotomy between multiple economic challenges and exuberant markets. The Fed is unlikely to step in to prevent the bubble as it is currently more worried about the near-term downside for growth than financial stability.

MacroQuant sees significant downside risks to stocks over a 1-to-3 month horizon and suggests increasing allocation to long-term bonds. The model favours defensive equity sectors but is also hedging its bets by overweighting materials.