Liderazgo de pensamiento.

Just a few months ago, the outlook seemed relatively clear: the slowdown in inflation was expected to allow central banks to gradually support the economic cycle through rate cuts. That outlook has now faded into the past.

In both the United States and Europe, the resilience of the economy and the return of inflationary pressures have led central banks to resume their monetary tightening policies. The Fed raised rates by 25 basis points in September, while the ECB had taken the same step a few days earlier. But beyond these decisions, it is above all the shift in the direction of monetary policy that, in our view, is of particular importance.

Growth is not just holding steady. It is robust, particularly in the United States, and the rise of artificial intelligence is driving growth across many sectors. Furthermore, inflation remains a clear concern. Central banks must remain vigilant, and markets must learn to adapt without the ongoing support of accommodative monetary policy. Against this backdrop, we look ahead to the months to come.

• Persistently high interest rates are dominating the markets: rising U.S. yields are increasing pressure on growth stocks and risky assets.

• Europe remains vulnerable due to energy risks and rising tensions over French debt, for which borrowing costs are increasing significantly.

• We are continuing to focus our portfolio allocation on short- to intermediate-term bonds and remain positive on stocks, particularly U.S. stocks, while we have begun to take some profits.

• The “neither war, nor peace” scenario in the Middle East is fueling volatility, while tensions surrounding oil infrastructure and the Strait of Hormuz are exacerbating supply risks and global inflation.

• Faced with persistent inflation, central banks are maintaining a restrictive stance, leading to a broad-based rise in interest rates in the United States, the eurozone, and Japan.

• Despite rising interest rates and concerns surrounding certain issues related to artificial intelligence, equity markets have seen only a modest decline.

• In Europe, the ECB raised interest rates by 25 basis points and is maintaining a hawkish stance, while growth forecasts have been revised upward, except for France.

• In the United States, rising energy prices are fueling inflationary pressures, while strong employment and economic activity have driven interest rates higher.

• Geopolitical tensions remain high, amid escalation in the Middle East and the rise of far-right parties in Europe, supporting oil prices and fueling short-term volatility.

•    Kevin Warsh’s “hawkish” stance in the face of persistent inflation and US economic resilience led to a rise in interest rates, weighing on risky assets.
•    In the eurozone, August inflation rose to 3.3% as expected, largely due to energy prices, while the Chinese economy continues to suffer from sluggish domestic demand.
•    In Japan, economic indicators are surprising on the upside and comments from the Bank of Japan remain restrictive, paving the way for a likely rate hike in September.

Why is this? What differentiates the asset classes?

As summer draws to a close, markets have taken a completely different turn. Following a volatile first quarter, the period that followed the publication of Q2 earnings results has reaffirmed the merits of our positioning: maintaining a contrarian exposure to software and healthcare stocks has proven to be both a powerful and a diversifying source of returns. 

On the software front, which is our largest overweight, fears of AI disruption were tempered by a very good earnings season, as software companies are quickly adapting their offering to integrate AI agents.

Alternative social infrastructure offers resilient debt opportunities in essential healthcare, education, logistics and water services.

•    The lull in tensions over Iranian oil driven by Strait of Hormuz negotiations is overshadowed by the resumption of the trade war waged by Washington against Canada and China.
•    Economic activity in the US and the Eurozone shows resilience, though tempered by stagnant US consumer spending and a contraction in French services. 
•    Pressure on the OAT-Bund spread continue to build, fuelled by the budgetary deadlock in France and investor concerns over the economic proposals of the leading presidential candidates.

•    Oil flows passing through the Strait of Hormuz are reportedly overvalued, which, combined with Houthi attacks and rising gas prices, pushed the global commodities index above its 2022 peak.
•    Faced with the sharp rise in government bond yields, US Treasury Secretary Scott Bessent massively increased Treasury buybacks to reassure markets, triggering a drop in the dollar and a surge in precious metals in return.
•    Equity markets racked up serious losses this week. The tech sector was particularly badly hit and this time with additional worries over increasingly powerful Chinese AI models, although future productivity gains remain promising. 

•    Tensions between the United States and Iran, as well as attacks in the Red Sea, are reigniting fears over energy supplies, pushing the price of a barrel of oil towards $100.
•    The US is calling for an additional $87 billion in military spending, whilst Donald Trump has announced further tariff increases.
•    In the eurozone, the slowdown in inflation allowed the ECB to keep interest rates unchanged at its July meeting.