The global economy in Q3 2024 is navigating its way through stabilization. Despite slow growth, both the US and Eurozone have dodged recessions, and inflation, though above target, is on the decline. Growth outside the US is on an upswing, easing recession concerns. US stocks are shedding their negative perception thanks to strong economic activity and potential interest rate cuts. We’re optimistic about Swiss and US markets, while taking a more cautious stance on emerging and Japanese equities.
Credit spreads have narrowed, especially for high-quality US corporate bonds, making it an opportune time to enhance portfolio quality without sacrificing yield. The long-term demand for energy and materials remains strong, but short-term profit-taking could be wise. With the Fed Funds Rate at its highest since 2007, we are seeing tighter financial conditions as inflation falls. Small-cap stocks have outperformed large-caps recently, while tech stocks are under pressure. The STOXX Europe 600 Index has seen a slight decline due to higher eurozone inflation impacting ECB policy. Japanese markets are mixed, and Chinese stocks remain stable despite weak manufacturing data. Energy and utilities have outperformed, whereas tech stocks have declined, with speculators bullish on commodities and gold. US Treasury yields are mixed amid concerns about weaker demand in recent Treasury auctions and rising credit risk for high-grade US corporate bonds. Investment in commodities is up, with hedge funds bullish on gold but bearish on Brent oil, and limited new supply in silver could drive future price increases.
In essence, the economic landscape’s stability reduces risks but also limits opportunities. This could lead to more equity market volatility. Therefore, focusing on high-quality fixed-income investments and maintaining a balanced portfolio is the way to go. It’s crucial to stay careful yet opportunistic, prioritizing quality and making strategic adjustments based on prevailing market trends.
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