investment insights
Three must-see charts for investors this month
In July 2024, financial markets faced a significant rise in political risks. In Europe, the political fragmentation that followed the French legislative elections intensified market volatility. Following years of turbulence, the United Kingdom has opened a new political chapter – a major challenge now awaits the new Labour government of Keir Starmer to sort out the economy. On the other side of the Atlantic, the US political scene has been turned upside down by the assassination attempt on Donald Trump, as well as Joe Biden’s withdrawal from the presidential race. This uncertainty once again emphasises the importance of strong guidance. During this blazing political summer, what are the three charts investors need to keep in mind?
This month, we showcase three areas of interest for investors:
- the impact of (geo)political risks on the markets, which we presented within the framework of our ten investment convictions for the second half of 2024
- opportunities in cyclical equities
- the importance of a prudent investment strategy which favours portfolio diversification.
Investors should prepare for persistent volatility while taking advantage of the opportunities offered by active management and an in-depth analysis of macroeconomic and geopolitical trends.
1. Maintain neutral exposure to risk given the geopolitical uncertainties
For the second half of 2024, we are maintaining a neutral stance in terms of portfolio risk. We will adjust our exposures depending on the opportunities that arise, while remaining alert to political and geopolitical risks. Market fluctuations could provide opportunities in risky assets, particularly if renewed risk aversion temporarily weakens the high correlation between stocks and bonds.
Read also: 10 Investment Convictions
2. Cyclical securities preferred
In equities, we favour cyclicals over defensive stocks, based on expectations of resilient economic growth and continued disinflation.
Read also: Equity sector preferences
3. Weak volatility of equities: high correction risk
In the chart below, the VIX (or Volatility Index, which measures the volatility of the market by indicating the periods of stress on financial markets) is at a historically low level, while the S&P 500 has hit record highs. This situation may leave markets vulnerable to corrections. For this reason, we keep risk exposures at strategic levels by balancing equities and bonds. Maintaining caution in portfolio positioning is crucial.
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It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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