Anti-cyclical trading favoured

At a glance

Economics

• Moderate growth in the eurozone, additional momentum not expected until 2025.
• The US economy is slowly cooling down and preparing for a soft landing.
• Relatively slow steps expected by the ECB and the Fed on the way down from the interest rate summit.

Equities

• Recession fears, negative seasonality and unwinding of carry trades led to a sell-off in early August.
• Positive economic and central bank signals, share buyback programmes and low volatility led to a rally.
• Negative seasonality and US elections pose risks. Counter-cyclical trading and balanced positioning were favoured.

Bonds

• While a rate cut by the Fed in September is almost certain, the size of the move remains unclear.
• Increased interest rate volatility on both sides of the Atlantic argues for duration close to neutral.
• IG and HY risk premiums recently widened slightly due to recession concerns. EM local currency bonds still preferred.

Commodities

• Gold at all-time high, but drivers have recently turned. Interest from financial investors increases as interest rates fall.
• Crude oil in a solid starting position despite economic pessimism. Negative outlook seems to be priced in.
• Industrial metals suffer from weakness in industry. First signs of strength under the surface, especially in China.

Currencies

• The start of the US interest rate turnaround is likely to weaken the US dollar.
• There could be short-term fluctuations in the euro-dollar exchange rate around the US presidential elections.
• The SNB and ECB moving in lockstep leads to a sideways movement of the euro-franc exchange rate.