Global strategy 3Q 2024
|The latest economic and inflation data support a normalisation of monetary policy. The ECB started by cutting interest rates for the first time in June, while the US Fed is still waiting. Uncertainty about the future interest rate path is considerable in view of geopolitical uncertainties. We also expect increased volatility on the bond markets in the 3rd quarter. For corporate bonds, we recommend the BBB rating class and IG-rated subordinated bonds (corporate hybrids). We expect a positive price trend on the global equity markets in the 3rd quarter.
Economy: The US economy weakened significantly in the 1st quarter. However, domestic demand, the backbone of the economy, still held up well. Recent consumer data has already been weaker, but more data is needed to confirm an economic downturn. A weaker economy should ease price pressures. The May inflation data already reflected significantly weaker price pressures in services. The Eurozone economy surprised in 1Q with GDP growth of +0.3% Q/Q. Germany also managed to return to growth after a recession in H2 2023. The recovery should continue in 2H 2024, although the smouldering trade conflict with China and the growing influence of populist parties in Europe represent risk factors for the growth outlook. Inflation should continue to fall, with the focus remaining on services inflation in particular.
Bonds: In contrast to the ECB, the data situation was not yet sufficient for the US Fed to cut interest rates for the first time. The decisive committee, the FOMC, would like to gain further confidence that the inflation rate is moving sustainably towards the inflation target. We expect the economy to cool down and price pressure to ease, leading to the first rate cut of 25 bp in September. The economic data published since May has led to a noticeable fall in yields on US government bonds. At the beginning of June, the ECB Governing Council felt that the time had come for an initial interest rate cut of 25 bp. The development of core inflation in the coming months will be decisive for the future path of monetary policy. The economy remains relatively weak for the time being, energy prices have calmed down and this is also to be expected for labour costs. We expect the next interest rate cut of 25 bp in September. German government bonds with medium and longer maturities should continue to move sideways in a volatile manner.
Currencies: The forecast for EURUSD based on fundamental data favours a slight weakening of the USD. However, the risks in Europe, particularly in France, have increased, meaning that the euro should fluctuate more widely than recently. The gold price should benefit from falling interest rates and strong demand from global central banks.
Equities: The rise in the global equity market index this year will be supported by solid earnings growth, which will accelerate further in 2025. We expect the global equity market index to rise in a range of 0% to +5% in the third quarter. The favoured sectors are technology, healthcare and non-cyclical consumption.
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