Daniel Varela, CIO, shares with you our investment convictions for the 3rd quarter of 2024.
Central banks no longer really have reasons to maintain restrictive monetary policies in place. Indeed, in industrialised as well as most emerging countries, inflation is continuing to slow and is gradually returning to a level in line with the objective.
The Swiss National Bank began cutting rates in March. Since then, several central banks have begun to ease their monetary policies, including the European Central Bank, which cut rates for the first time in June.
Other central banks will follow suit over the coming months, starting with the largest of them all, the US Federal Reserve.
Although a global recession has been avoided, there has been a marked slowdown in activity over the last two years, particularly in Europe, where the war in Ukraine and the energy crisis have had a severe impact.
The US economy, which has held up rather well so far, is also at risk of running out of steam. A slight rise in unemployment could penalise consumer spending at a time when government spending is beginning to be reduced.
The synchronised easing of monetary policy around the world has therefore come at just the right time. It will contribute to facilitate the emergence of a new expansion phase of expansion, which will undoubtedly last for several years.
The monetary and economic context suggests a relatively favourable period for the financial markets. Yields are expected to fall on bond markets, while riskier assets such as equities will continue to rise.
Unless, of course, political upheavals spoil the atmosphere. Power shifts are looming in Europe and especially in the United States. Budgetary laxism and protectionism are the main threats to the economy and the markets.
Faced with political uncertainties that could accentuate volatility in the second half of the year, we are reinforcing the defensive nature of our portfolios. We are reducing our exposure to European and US equities in favour of Swiss equities, and reducing our exposure to the euro.