The authors: DJE's strategy team monitors and evaluates the markets on an ongoing basis using the in-house FMM method according to fundamental, monetary and market-technical criteria.
US market continues to offer better investment opportunities than Europe
September did not live up to its reputation as the seasonally weakest month of the year. The international capital markets developed positively, particularly in Hong Kong and China, boosted by the stimulus measures announced by the Chinese government.
A recession in the USA or even a financial market crisis appear unlikely. We therefore remain generally positive for the markets in the short and medium term. Stock markets could rise again, especially after the US election. A scenario similar to that of the mid-1990s, i.e. moderate US interest rate cuts in the absence of a recession, remains realistic.
Inflation is on the decline and further interest rate cuts will come. However, we believe that some market expectations with regard to the forthcoming interest rate cuts are too optimistic. With regard to possible interest rate cuts in 2025, the ECB's strategic uncertainty appears to be greater than that of the Fed. It is conceivable that the ECB will have to do more in 2025 due to the structural growth problems in the eurozone, which could also depress the euro as a result. Larger US dollar hedges are therefore not necessary.
Opportunities that we see
Structural potential growth remains higher in the USA than in Europe in particular: the US equity market therefore continues to offer the better investment opportunities in the medium term.
We see opportunities in shares of companies whose business model is largely independent of the economy and promises high margins. Ideally, there should also be a certain cost-cutting potential.
In the longer term, there are few reasons why equities should not perform similarly to the past ten years.
The global and US banking sector is structurally well positioned.
Looking at the "Magnificent Seven" and companies in the field of artificial intelligence, we do not currently see an overbought situation. The market leaders of today should also be the market leaders of tomorrow.
Bonds from good issuers, especially in the medium maturity range, are currently a good investment alternative.
Gold is currently the anchor of confidence chosen by the market and the most convertible of all real assets. The upward trend in the gold price should therefore continue in the medium term.
Risks that we are observing
A recession in the US economy harbors risks, but is not currently our base case scenario.
The market's expectations of interest rate cuts currently appear too aggressive to us.
Persistent structural growth problems in Europe and especially in Germany could be a burden.
In Germany, high energy costs, high wages, immense bureaucracy and little flexibility are jeopardizing the competitiveness of many industrial groups. There is also a lack of political understanding that Germany needs to take countermeasures, particularly with regard to labor costs.
Globally and geopolitically, China continues to pose the greatest risk for us. Weak growth in the Chinese economy - despite recent stimulus - could also spur inflation again if the country is no longer able to export cheaply due to new tariffs.
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