European equities outperform temporarily

At a glance

Economics

• Initially weak growth in the eurozone, German reforms could contribute to more momentum from spring onwards.
• The US economy remains robust. Trump's programme gives economy a short-term boost with long-term risks.
• Inflation remains stubborn, especially in the USA (tariffs, wage pressure). Fed interest rates remain high, ECB can cut further.

Equities

• Europe is outperforming, at least temporarily. However, structural problems and weak growth remain.
• Global liquidity, rate cuts and growth provide support. Market breadth should increase.
• US policy remains a source of uncertainty. Counter-cyclical action and balanced positioning needed.

Bonds

• The Fed's surprisingly hawkish outlook for this year and the robust US economy supported US yields.
• Trump's policy agenda (tariffs, immigration, debt) increases the risk of inflation. We are keeping duration close to neutral.
• High cash inflows and solid fundamentals continue to speak in favour of credit despite high valuations.

Commodities

• Gold remains well supported by falling interest rate expectations and geopolitical uncertainties.
• New sanctions on Russian energy exports and colder temperatures are supporting oil.
• Industrial demand for copper and aluminium remains firm.

Currencies

• The dollar has appreciated significantly in Q4 2024 as the market is pricing in an end to interest rate cuts in the USA.
• However, the tailwind for the greenback is likely to ease somewhat as the year progresses.
• The Swiss National Bank continues to try to limit the strength of the Swiss franc by lowering the key interest rate.