The end of US electoral uncertainty boosts markets
The conclusion of the US presidential elections has reduced the uncertainty that dominated markets in recent months. A clear and quick outcome has significantly improved investors’ risk appetite, paving the way for a potential year-end rally. Volatility and hedging strategies have decreased, allowing for greater confidence in equity investments.
Macro outlook: US strength vs. eurozone weakness
In the United States, recent economic data exceeded expectations, with retail sales and the ISM index showing growth. Deregulation and tax cuts proposed by Trump could further boost short-term growth. Conversely, the eurozone continues to face manufacturing sector weaknesses, with little improvement expected until next year.
In China, the government remains cautious on implementing new stimuli, waiting to see the outcome of US trade policies.
Bonds: inflation and yields
US bonds face the risk of a return to inflation by 2025, prompting the Federal Reserve to adopt a cautious stance on interest rates. In Europe, the inflationary context remains more subdued, making European bonds more appealing. High-yield bonds stand out as the most attractive option.
Equities: US markets take the lead
The electoral outcome has sparked euphoria in US stock markets, with Wall Street outperforming globally. Banking and technology sectors are driving the rally, supported by favorable policies. However, trade uncertainty could weigh on European exports, maintaining a gap between global markets.
Asset allocation: focus on equities and commodities
Given the positive outlook, the strategy recommends overweighting equities compared to bonds. Portfolios should prioritize developed markets and high-yield bonds. Commodities also serve as a strong hedge against inflation risks.
