Monthly House Views - Different Rhythms - March 2024

All regions are growing but at very different tempos. The US economy continues to grow a particularly strong pace, with a robust labour market and supportive fiscal policy. The euro area and United Kingdom, meanwhile, are marching to a slower beat but remain resilient, largely thanks to healthy labour markets. The easing in inflation is providing a welcome boost to household purchasing power. Against this background of easing inflation and solid labour markets, central banks are likely to cut rates gradually from late spring. They would probably rather risk a deeper economic slowdown than allowing inflation to remain durably out of control. The Chinese economy, meanwhile, continues its complex tango with structural problems and crucially a loss of faith by international investors which is likely to persist in the current geopolitical context.

Maintained Overweight to developed market equities. Further evidence of economic robustness encourages us to maintain our risk exposure to equity markets. We are Overweight United States markets, given its strong economy and high exposure to AI, and European markets, for their still favourable valuation gap. We remain Underweight emerging markets as investors remain prudent about the Chinese stock market. We remain constructive on sovereign bonds and on investment grade corporate bonds, where yields remain especially attractive. Overall, we retain a highly diverse positioning, which has allowed us to catch the rally in equities while retaining protection against any correction.
 

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