In May, with the attention focused onL ONE BIG BEAUTIFUL BILL PRomosso from Trump, the global actions have recovered theand losses recorded After the signs of April caused by the announcement of the duties. Unfortunately, this tax and spending project will not be able to mitigate economic uncertainty, because it aims to maintain the US deficit around 6.5% per year, which means that the debt ofThe US government It will continue to grow. It also remains the risk of stagflation: the estimates on GDP US have fallen abruptly in recent months, while the forecasts on inflation remain well above the Target of the Federal Reserve. All this leads us to maintain our underweight position on the actions. The drop in corporate profits in developing economies persists, while there is great uncertainty about when they could start recovering. Equally worrying is that economic weakness is accompanied by an inflation constantly above the objectives of the central banks, thus preventing us from taking on a bullish position on the bonds, especially in consideration of the fact that the Fed has difficulty justifying preventive cuts in interest rates. We also continue as asora orapping liquidity. It underlines thePictet Asset Management Strategy Unit.
Asset allocation: when uncertainty persists
Despite the signs of weakness shown by the US economy, our commercial activity indicator for the markets sViluppati went back – explain the analysts – while the emerging markets showed a slight slowdown, while remaining firmly growing. The growth gap between emerging and developed markets is widely expanding – in favor of emerging economies: it is currently equal to 2.5%, slightly higher than average of 2.3% since 2011, But we plan that it will reach 3.5% by the end of the year.
The economic activity US is lower than the average and price pressures remain in the short term. It is likely that the new duties on US imports will worsen these two negative trends, limiting the fifted maneuvering margin. A preventive cutting of the rates in order to avoid an excessive weakening of the economy, at a time in which inflation is far superior to the 2%target, risks unleashing an even more massive sale of long -term Treasury. On the contrary, the economic prospects for the Eurozone are in improvement: the disinflation tendencies, partly pulled by the shaving of the dollar and the drop in energy prices, offer the ECB space enough to operate two or three cuts by the end of the year. As for emerging markets, our indicators show growth rates of Chinese GDP higher than the average, despite the economic slowdown caused by the commercial war with the United States. There China, However, it benefits from large margins of maneuver on a fiscal level and an abundant internal liquidity, elements that improve the prospects emedium -term conomics.
Caution prevails: the Pictet AM of Pictet AM
Our indicators of Liquidity clearly show a continuation of the large Synchronized rates cutting cycle. The monetary policy of most of the main central banks in the world is found in a locking phase, with only rare exceptions still in narrow, such as the Bank of Japan that we foresee will increase rates again in this cycle. Our evaluation indicators suggest that further slowdowns of tendential growth would make the obligations appear extremely convenient. The rebound of the USAzion of the USA makes other regions relatively convenient; US shares approach high cyclical assessments, with a price/profit ratio currently equal to 21 (starting from 1990 the average was 16.5x).
Our sgrowth for US profits It is almost flat and it is likely that it will remain a weak in the absence of significant tax cuts or an improvement in the economy. The sentiment of analysts on the profits of European actions has also recently collapsed, now widely aligned with that for the United States. Among the sectors, the healthcare one has been heavily affected and could now record a relative attractiveness. Finally, our technical indicators record positive signals for shares, tendency to recover in all regions. At the same time, we consider the dollar slightly hyper -time.
Regions and equity sectors: emerging markets are highlighted
The titles of emerging markets are on the rise: Between the beginning of the year and the end of May they generated a performance of about 6% in local currency. In comparison, the MSCI indices for US shares recorded an increase of just over 1%. The reasons why investors should continue to overlap this asset class are numerous. First of all, usually a weak dollar coincides with earnings from the titles of the emerging markets, in part because the depreciation of this currency improves the relative attraction of the assets outside the United States. The second motivation is that emerging economies benefit from the signs of a loosening of commercial tensions between the United States and China. A third positive aspect is represented by China’s will to stimulate her economy. The tax support and monetary supplied by the Chinese authorities in recent months has strengthened industrial production and should stimulate a growth of consumption, which will revive the entire asset class.In in accounts, however, it all depends on Economic Surpers. The gap in the growth of real GDP between emerging and developed economies has grown almost uninterrupted from the end of 2023 e We expect growth greater than 3% by the end of next year. This should translate into an increase in profits for emerging market companies. According to the analysts’ forecasts, During 2025 and 2026, corporate profits in emerging markets will grow at a higher rhythm compared to both the United States and Europe.
Emerging markets attend up revisions for forecasts on corporate profits
We have neutral positions or Of underweight per most of the equity markets: we submit the United States since we consider cHe the assessments are in contrast with the deterioration of the country’s economic prospects. The multiple p/s of the US actions seem to be intended to contract compared to the current level in a political context that encourages investors to realize a higher portion of their capital in domestic markets. By learning to the sectors, we continue to overlap the financial securities, intended to benefit from a steep curve of yields and one potential deregulation by the Trump Administration. Balso and financial institutions h institutionsyear a dynamic of healthy profits and are exchanged for convenient assessments.
Fixed income and currencies: the weakening of the dollar
Reversal of policies on the duties of Trump president Together with his tax program he is destined to increase the deficit weigh on the dollar. With the intensification of fears about the political credibility of the government, from January to today the US currency has already lost 8% of its value. Furthermore, the simultaneous Sell-Off of the dollar and the Treasury, followed to the market turbulence caused by the liberation day, represents a worrying phenomenon. The breakdown of the long -course relationship between the Punta’s US asset and its currency reports a deterioration of its status as a good refuge. We plan that the Dollar will still lose ground.
Consequentially, “We overlap the currencies of the developed markets, providing that their continuous appreciation in the coming months will help reduce the evaluation gap with respect to the dollar. Our neutral position on Treasury USA remains unchanged. The Term Premium (a component of the US Treasury yields) has reached the highest level in over a decade, a sign that investors ask for a higher return to the expected rate of economic growth and inflation to hold a long -term obligation. Nonetheless, the Treasury should be supported by the cuts of interest rates: for this year we foresee one or two cuts by the Fed. A weaker dollar also supports emerging market bonds. We continue to overlap the bonds in local currency due to their favorable national fundamentals, the decrease in oil prices and high relative real rates. Our overweight in the corporate obligations of emerging markets is based on the belief that emerging economies will remain resilient and that their growth will exceed that of the counterparties developed. We foresee Also that the central banks of the emerging markets, People’s Bank of China includedthey will further cut the rates to support the economy.Looking at the credit market, We keep our overweight position on European high yield bonds, which benefits from a more interesting evaluation than the US counterpart “.
