Zusammenfassung
Our monthly Global Investment Views highlights the latest views, convictions and outlook of our CIOs.
A summer of reality checks on market expectations
Market moves over the summer have served as a reminder that, at a time of high valuations, any mismatch on corporate earnings or monetary policy expectations and any scare on growth could be triggers for sudden falls.
Three hot questions
- How do you see central bank policies evolving this year?
- What’s your view on the US economy and labour markets?
- Do you think gold prices can maintain the upward trajectory seen so far this year?
Recalibrate risks as markets sail choppy waters
Markets are shifting their focus to economic growth, as inflation continues to decline. The primary reason for this shift seems to be weakening consumption, which is now extending to wider sections of the economy. In the EZ, a multi-speed recovery with divergences across countries is the main theme. In addition, fiscal policies could be a drag on growth in the medium term.
Flexibility in duration is crucial at this stage
Reaffirmations of the Fed put by Chair Jerome Powell primarily due to continued progress on inflation have shifted the market’s focus towards labour markets and economic growth. While we are seeing signs of slowing labour markets that would encourage the Fed to cut rates, a lot of that monetary easing is already priced into the markets. In Europe, the story is similar with respect to inflation falling, but some components such as services are sticky.
Play market anomalies led by fundamentals
The August turmoil that began after negative surprises on earnings of some US tech companies was later exacerbated by weak macro data. We have been saying for quite some time that there is ambiguity about whether companies can quickly translate their AI-related investments into a sustainable growth in earnings. Now, the markets seem to be questioning that as well, as valuations in select corners are still a concern, along with weak macro dynamics.
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