Thought
leadership.

•    The president-elect’s very aggressive stance on foreign policy gave investors more cause to worry and US equities fell further and bond yields increased. 
•    The US labor market continues to show signs of strength, with rising job vacancies and falling unemployment registrations.
•    The UK saw the biggest surge in bond rates over the week. 10-year gilts hit an intraday high of 4.9%, a level not seen since 2008.

•    The latest developments in Europe have failed to improve political visibility.
•    In the US, the economy is still proving resilient.
•    We are sticking with our tactically positive stance on equities with the accent on the US and China. Our strategic view on investment grade credit is unchanged.

As expected, the ECB cut its deposit rate by 25 basis points.

In China, the lack of concrete details from Beijing regarding economic support measures disappointed investors, which weighed on the stock markets. 

In the United States, the release of inflation statistics held no surprises, with the CPI index aligning with expectations.

Edmond de Rothschild AM appoints Vianney Hocquet as Hybrid Corporate Debt Portfolio Manager, effective December 11th, 2024.

Overweighting US equities has become a consensual choice that nobody can deny today. This position is however likely to change during the coming months.

The theme of resilience, i.e investing in companies able to withstand further disruptions to the global production chain and a firmer pursuit of sovereignty and security, now occupies a central place. 

In the bond markets, we are unwinding our overweight on emerging bonds pending the arrival of the Trump administration, and increasing our exposure to subordinated financial bonds and corporate hybrids.

In France Michel Barnier’s government fell, ushering in a fresh bout of uncertainty. The technical government option now seems to be the most likely scenario. However, peripheral eurozone countries are enjoying some momentum, which has offset the negative impact of French and German difficulties.

Economic indicators in the US are still buoyant but less so as the economy gradually returns to normal.

In China, the situation is improving but gradually, with the Caixin manufacturing PMI rising for the second month running.

Political tensions in France and also in Germany are inevitably weighing on PMIs.

Eurozone inflation has been slowing so the ECB can continue to reduce rates. 

Economic activity in the United States remains strong, while in Japan, inflation has resumed its upward trajectory.

The eurozone is still suffering from the conflict’s consequences and energy prices in particular are taking a toll as we enter winter.

The ECB is coming under increased pressure to ease its monetary policy and put a brake on the economic slowdown.

In Japan, the chances of the central bank tightening monetary policy are mixed.

As economic growth shows signs of overall resilience and interest rates begin to normalise, the High Yield market is now supported by a more favourable  environment.

Alexis Foret, Head of High Yield at Edmond de Rothschild Asset Management (France), believes that bonds in this segment – with their attractive yields and rising average coupons – have all the characteristics to cater to investors’ every need.

More than a victory, a triumph

Donald Trump and the Republicans have won full control of the White House and Congress. This scenario, which came with rather low odds in the opinion polls, has extended the “Trump trade” (bullish equity market and rising US long-term yields and dollar) and has this time around created a wider dichotomy between the United States and Europe (where equity indices and long-term yields are declining). Investors have focused on the Republican candidate’s promises of lower corporate taxes and deregulation in the US and rising tariffs for other trade partners – Europe included. 
They have also factored in deeper public deficits (rising real and nominal rates) and higher inflationary risks (rising inflation break-even rates). Markets have experienced violent swings since early October and the beginning of the “Trump trade”, with the S&P500 outperforming the Eurostoxx 50 by almost 9%.

The Republicans, under the leadership of D. Trump, have taken control of the House of Representatives.

Germany is preparing for political upheaval with a vote of confidence scheduled for December.

Markets have continued to rotate into exclusively US assets in another illustration of American exceptionalism.

Edmond de Rothschild announces the appointment of Nathalie Cerutti as Director of Corporate Social Responsibility. Nathalie joined the group on November 1st 2024.