Anchor Insights December 2024

• Stock markets are slightly stable, as the market digests geopolitical changes.
• Better performance of bonds, somewhat lower interest rates and stable credit spreads.
• Gold pause follows all-time high, oil stalls near $70-75 and bitcoin hits new highs.
• The dollar resets a range, between 1.03-1.08 against the euro, with the political instability of the Europa core and the profiling of Trump 2.0. policy.

• The sector rotation of equities can extend the bull trend in the stock market.
• Positive changes are on the horizon in the main armed conflicts, positive for risk assets.
• China is consolidating its recovery, although with deflationary pressures. Gold, benefited.
• Business results will mark the end and beginning of the year.

Opportunities:

• Information Technologies: take advantage of significant corrections to accumulate.
• Real Estate and Energy: undervalued, with a long way to go.
• Health and Biotech: higher growth than other sectors and attractive valuations.

• Credit spreads at average levels, both in European and American bonds. 
• Stabilization of IRR in government bonds, both European and American.

• The dollar holds the 1.03-1.085 range due to higher interest rates. The weakness of the USD due to the evolution of the public deficit and debt may be counteracted by geopolitics temporarily, but it should depreciate the greenback in 2025.
• The main crypto assets are experiencing a sweet moment due to Trump's "friendly" policy 2.0 that is predicted.
• The price of industrial commodities and metals may be weakened by lower demand from China and India, while gold could fall if inflation falls, and the reduction of central banks' balance sheets continues.

• Increase in cybercrime, disruptions in essential infrastructures.
• Financial fragmentation of the public debt market Euro.
• Reduction of liquidity in financial markets, volatility.
• Political incapacity in the face of inflation, climate crisis and migration cause social tensions, populism.
• Extension of the Israeli Palestinian war to the Middle East, oil at 200 USD.
• Conflict in Ukraine, escalation of NATO-Russia tension, maintenance of sanctions.

• Improved business expectations are driving a cyclical recovery. Monetary policy shift towards a less contractionary phase, although concerns are beginning about a deterioration in employment that would be associated with an economic recession. In addition, the rapid implementation of Artificial Intelligence (AI) in production processes exerts deflationary pressure. China's attempt to boost its economy can make or break global growth and influence inflation.
• At the business level, profit growth slows down and the first profit and sales alerts appear. The sustainability of the US debt makes it difficult to lower rates without a budgetary adjustment, in the face of a new legislature dominated by an increase in the deficit.
• The Middle East is experiencing changes because of Israel's war with Hezbollah and Hamas, while the conflict between Ukraine and Russia continues pending a possible truce in January. European countries are facing a political crisis in France and Germany as they ramp up military spending, and the U.S. is seeking a pact between Saudi Arabia and Israel to focus on the Asia-Pacific region in its tussle with China.