Anchor Insights May 2025

Anchor Insights

The vision of our Investment Committee to tactically adjust the appropriate investment strategy to the financial markets in any environment.

Anchor Insights May 2025

Market Wrap

Sharp fall and subsequent recovery after Trump's "Liberation Day", ending with slight monthly declines in the stock markets. Defensive sectors in positive.
Decline in bond yields, positive performance of fixed income.
The USD cuts against the euro to 1.15.
Gold rises by central banks, oil falls by OPEC.

Insights

After the scare over tariffs, negotiations, although a 10% or more tariff is most likely
Recession risks on the upside due to the effects of the trade war.
Contention between fiscal and monetary policy in the US (Trump-Powell), persistent volatility.
Reduced corporate profit expectations by 2025.

Equity

Context of downward revision of expected earnings for the next 12 months with relatively high multiples (20.6x) in the US stock market and more in line with the average in Europe (13.5x).

The impact of tariffs on the economy may be relevant to a moderate slowdown and even a recession. We assume a minimum tariff rate of 10% and an acceptable impact on business margins and profits, with lower growth.

Difficulties in increasing the multiple from current levels, which gives a sideways scenario at best.

Opportunities:

Technology: high growth, but high valuations; Accumulate in falls
Health and biotech: higher growth than other sectors and attractive valuations.

Fixed Income

Bond response to recession risks, although for now the risk of inflation weighs more heavily to change monetary policy. Normalized positive slope yield curve.

Long terms offer more opportunities in the face of an economic slowdown. Investment-grade corporate debt is less attractive than government bonds due to spread compression. High yield continues to be favored by lower refinancing risk, shorter duration and high coupons.

Reduction of correlation with equities, better diversification effect in the face of stock market volatility.

Credit spreads at average levels in European bonds, but high in American bonds.
Rally in IRR in government bonds, both European and American.

Alternatives & Currencies

The dollar is weakening on recession risks. 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.
Gold exceeds 3,000 USD in the face of increased demand from China in its change in reserve policy and as a refuge from uncertainty.

Risks

Macroeconomic divergence between regions, reduction of liquidity in financial markets, volatility.
Reduction in international trade, tariffs and increased costs, more inflation.
Increase in cybercrime, disruptions in essential infrastructures.
Financial fragmentation of the Euro-public debt market, debt crisis.
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.

Macroeconomic Environment

The trade war opened by Trump increases the risk of global recession at a time of divergence in the phase of the economic cycle between the US, Europe and China. Less restrictive monetary policy slows down in the US, continues in Europe and becomes expansive in China while the US slows down its growth, Europe is facing recession and China is looking for recovery. 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 expected growth rate of earnings remains at 12.7% in the US and 12.5% in Europe for the next 12 months, although it will be revised downwards because of the trade war.
The war in Ukraine continues with small advances towards a truce, while in the Middle East it fails.

01 May