Anchor Insights June 2024

• Moderate rises in the stock markets of developed countries and a slight correction in the main emerging markets.
• Revaluation in US treasury and credit bonds, stable European fixed income.
• The rise in copper and gas continues. Gold peaks and oil retreats sharply.
• The dollar steps back against the euro, although it remains within the range.

• Beginning of rate cuts by the ECB, uncertainty about the next steps.
• Leading cyclical indicators show economic recovery, so after a pause, the stock markets accumulate upside potential.
• The rebound in commodity prices could imply higher inflation in the medium term.
• China is back: the support package for the real estate sector could definitively solve the structural weakness of its economy.

Opportunities:

• Information Technology: Take advantage of significant corrections to accumulate.
• Renewable Energies: the need to decarbonise drives huge plans to invest in renewable energies.
• Real Estate: stabilisation of interest rates and a readjustment of valuations.
• Healthcare and Biotechnology: possibility of a lot of M&A activity in these sectors.

• Tight credit spreads on both European and US bonds. 
• Stabilization of yields on government bonds, both European and American.
• Improvement in the fixed income of emerging countries in "hard" currencies.

• The euro and dollar are in the range of 1.11-1.05. Even if the EUR lowers interest rates first, the USD tends to weaken due to the evolution of the public deficit and debt.
• The correction in real estate asset prices is underway in some European countries and American states. 
• Increase in the price of raw materials due to demand from China and India. Gold stabilizes.

• Economic slowdown, recession due to tightening of monetary policy.
• Extension of the Israeli-Palestinian war to the Middle East, oil at 200 USD.
• Conflict in Ukraine, escalation of NATO-Russia tension, continued sanctions.
• The persistence of high inflation leads to social tensions and populism.
• Financial fragmentation of the Euro public debt market.
• Reduced liquidity in financial markets, volatility.
• Increase in cybercrime, disruptions to essential infrastructures.
• Instability of the banking sector, reduction of access to financing.

• Improved business expectations foster a cyclical recovery. A shift in monetary policy to a less contractionary phase is priced in, although commodity rallies may lead to slightly more inflation. However, the rapid implementation of Artificial Intelligence (AI) in production processes exerts deflationary pressure.
• The release of corporate results is close to 80% higher than expectations, but economic growth is slowing down ("soft landing?"). A stagflation scenario is unlikely. The sustainability of the US debt makes it difficult to lower interest rates without a budgetary adjustment.
• The war between Israel and Palestine is becoming chronic and spreading in the region, while the conflict between Ukraine and Russia continues. European countries are increasing military spending and the US is seeking a pact between Saudi Arabia and Israel to focus on the Asia-Pacific region in its struggle with China.