Anchor Insights July 2024

• Moderate declines in the European stock markets, while the rest of the markets rise.
• Revaluation across all fixed income, both government and corporate.
• Correction in copper and gold, while oil rebounds.
• The dollar rebounds against the euro due to the French elections, although it remains within the range.

• The evolution of inflation and employment will mark the next steps in monetary policy. The Fed could follow the ECB in the summer.
• Assembly elections in France and presidential elections in the US may increase market volatility in the third quarter.
• The rebound in commodity prices could imply higher inflation in the medium term in a context of falling rates.
• Stress tests on banks may involve greater capital needs or concentration movements in the remainder of the year.

Opportunities:

• Information Technologies: buy the dip.
• Renewable Energies: decarbonisation is driving huge investment plans in renewable energies.
• Real Estate: in the face of a stabilisation of rates and after a readjustment of valuations.

• Credit spreads at average levels, both in European and American bonds. 
• Stabilization of IRR in government bonds, both European and American.
• Improvement in emerging market fixed income in "hard" currency.

• The euro and the dollar are in the 1.11-1.05 range. Although the EUR lowers rates first, there is a tendency for weakness in the USD 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 near $2,400.

• Economic slowdown with persistent inflation and restrictive fiscal policy due to deficits and debt.
• 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.
• Political incapacity in the face of inflation, climate crisis and migration causes social tensions, populism.
• Financial fragmentation of the public debt market Euro.
• Reduction of liquidity in financial markets, volatility.
• Increase in cybercrime, disruptions in essential infrastructures.
• Bank stress tests, greater capital needs and reduced access to financing.

• Improved business expectations are driving a cyclical recovery. The change in monetary policy towards a less contractionary phase is discounted, although rallies in commodities may generate some more inflation. However, the rapid implementation of Artificial Intelligence (AI) in production processes exerts deflationary pressure.
• The publication of corporate results exceeds expectations by about 80%, but economic growth slows ("soft landing?"). A stagflation scenario is unlikely. The sustainability of the US debt makes it difficult to lower rates without 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.
• Political uncertainty in France with repercussions in the EU and the start of the campaign for the American presidential elections in November, with greater volatility in the markets in the coming months.