Aktuelles und Perspektive.

•    Germany’s final fourth-quarter GDP reading showed a 0.3% rise QoQ, a sign that private consumption was strong, government spending on the rise and investment recovering.

•    Several Fed members moved to a more restrictive position by reiterating the need to have more solid proof of disinflation before cutting rates again.

•    US-Iran talks continued in Geneva but with no progress; Tehran rejected the US demands.

•    Geopolitical tensions remain high with the failure of Ukraine-Russia negotiations, the prolongation of US-Iran talks, the continued deployment of the US armada in the region, and the risk of a partial closure of the Strait of Hormuz. 

•    In the US, the FOMC minutes reveal differences of opinion among governors regarding inflation, which remains above target but is slowing, and resilient growth, which argues for patience before further rate cuts.

•    In the UK, unemployment rose to a 5-year high of 5.2% so markets are now expecting two rate cuts before June.

• Controlled exposure to credit risk through a selection of solid issuers (BBB–BB).
• An important investment grade base, with a minimum exposure of 30%, which helps structure the risk profile.
• A ladder-style maturity structure, with around 20% of the portfolio maturing each year between the first and fifth years, in order to maintain liquidity and the ability to reposition throughout the cycle.

By Aymeric Gastaldi, Lead Portfolio Manager – EdR SICAV Global Resilience at Edmond de Rothschild AM (France)

•    This week's US data were mixed and led to some interest rate volatility.
•    In Europe, European leaders argued for structural reform, thereby driving expectations of a “European wake-up call”. Simultaneously, the Banque de France forecasts resilient French growth in the current quarter.
•    In Japan, Sanae Taikaichi’s resounding electoral win gave her an absolute majority in parliament and could help her roll out a programme which includes tax cuts and higher investment.

The US market is rebalancing, notably in favor of small-cap stocks, as it begins to penalize the heavy AI investments by tech giants whose profitability is uncertain.

The sharp drop in the software segment is deemed disproportionate. The market is underestimating the diversity of companies in the sector and ignoring the Jevons paradox, according to which lower costs related to AI will stimulate software demand.

In this context, we are increasing our exposure to emerging market and Japanese equities. In fixed income, we favour financial bonds, emerging market debt, and corporate hybrids, focusing on short and intermediate maturities.

Since Donald Trump came to power, geopolitical tensions have escalated, calling into question alliances that were once considered set in stone. This was expressed openly by several leaders at the World Economic Forum in Davos at the end of January. Canadian Prime Minister Mark Carney gave a speech described as historic, calling for the formation of an “alliance of middle powers” capable of exerting influence between rival blocs. Emmanuel Macron, for his part, denounced “a world now governed by the law of the strongest” and stressed the urgent need for far-reaching reform of the European Union so that it can emerge as an autonomous strategic power. These statements, delivered in a location emblematic of globalization, highlighted the growing gap between yesterday’s international order and the one now taking shape.

One Year On, Time for a first assessment

•  Concerns over massive investment needs in AI mounted over the week and resulted in steep falls for US tech giants.

•  Kevin Warsh's appointment as Fed chairman weighed on sentiment because of his calls to structurally shrink the Fed’s balance sheet.

•  In Europe, Christine Lagarde continues to express confidence in the current monetary stance despite below-target inflation, while several ECB members warn of the disinflationary and restrictive impact of the euro's appreciation on financial conditions.

Historically, the roles were clearly defined: semiconductors were associated with cyclicality and close sensitivity to the macroeconomic cycle, while software was driven by secular, structural growth.
Today, we are witnessing a reversal of roles. The software industry has matured, and the laws of gravity and economics are beginning to apply, especially as software now represents a significant share of corporate budgets. At the same time, the semiconductor world has temporarily detached itself from economic reality, buoyed by a super cycle that combines technological disruption with excessive ambitions, reinforced by a textbook case of the prisoner’s dilemma .

•    After reaching a compromise agreement with the EU on Greenland, Washington is now threatening to increase tariffs for Canada by 100% as punishment for seeking closer ties with China.
•    The Fed left its rates unchanged as expected even if two FOMC members voted for another cut.
•    In the eurozone, PMIs are back in expansionary territory and lending is increasing, suggesting that a recovery may be taking shape.

Since the end of the Cold War, nuclear deterrence has held a special place in European strategic debate. A legacy of the bipolar era, it is often seen as the ultimate insurance policy, guaranteeing that no major aggression could be attempted against a state possessing nuclear weapons. From this belief flows an implicit but structuring idea: if the existential risk is deterred, conventional defence efforts can be reduced without serious consequence. Thirty years after the fall of the Soviet bloc, this conviction deserves to be seriously reexamined.