Adjusting our asset allocation

Macroeconomic update for May 2024

We anticipate that economic momentum could pick up in the coming months, potentially sparking a modest "late-stage mini cycle". Furthermore, we expect the US Federal Reserve to cut interest rates later than initially projected, but more than what is currently priced in by markets. Geopolitical risks have also been on the rise.

Against this backdrop, we have made adjustments to our asset allocation. In this video, our Multi Asset experts explain the details and the reasons behind these changes.

Key Takeaways

1. Stock market consolidation not as surprising as one might think
   After almost five consecutive months of stellar performance, equity markets entered a broad-based consolidation phase at the end of March. Is this the beginning of a stronger correction? We don't think so.
2. Threat of significant second inflationary wave?
   Three consecutive stronger-than-expected monthly prints for US consumer inflation, along with the escalation of geopolitical conflicts, were enough to rekindle inflation concerns. We don't see strong risks of a second wave of inflation.
3. We see equities as the place to be; fixed income downgraded, commodities upgraded
   Our current macroeconomic scenario of slightly higher growth favors "cyclical" asset classes like equities and commodities more than the fixed income segment. The sharp tightening of credit spreads has considerably reduced the margin for safety in credit. We remain overweight on equities.

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