LGT Private Banking House View

April 2024 - in a nutshell

The current economic and financial market environment is highly uncertain, with ge­opolitics, central banks and elections all making the next few months difficult to navigate. In this House View’s main article, we take a break from the day-to-day market environment and instead focus on our Strategic Asset Allocation (SAA). 

Gérald Moser, CIO & Head Investment Services Europe
Reading time
7 minutes
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In March, we have published our annual SAA update and our investment strategy article provides a summary of our process and the resulting outcomes. Defining the SAA is a crucial part of our investment process as it forms the backbone of all our portfolios. Our Tactical Asset Allocation (TAA) views are all based on our SAA. However, the rest of this month’s publication provides the usual commentary and views on each asset class.

Our macroeconomic article looks at the question of whether the Fed is in a position to cut interest rates. Recent developments in inflation and growth rates have led the consensus to significantly revise down its expectations for rate cuts in 2024, and pundits are beginning to question whether the Fed should cut at all in this environment. Given the Fed’s monetary policy framework and objectives, we believe that an overly restrictive monetary policy could jeopardise the goal of full employment.

Our fixed-income section discusses recent developments in central bank policies and their impact on the market. The Bank of Japan and the Swiss National Bank surprised the market while the US Federal Reserve and the European Central Bank (ECB) remained in line with expectations but hinted at possible rate cuts in the near future. With the outlook for interest rates volatile, our article aims to help you navigate the next few months.

In the equity section, we take stock of the current situation. Large-cap companies with "monopoly-like" qualities have been leading the market, particularly in the US and Europe. While a global economic recession has been avoided, we have seen recessions in both manufacturing and earnings. With the expected end of the industrial recession and the likelihood of higher interest rates for an extended period, new opportunities are emerging. We highlight the potential for value stocks and financials. On the sector side, we downgrade consumer staples to "Neutral".

Finally, we also discuss the recent moves in gold. Geopolitical turmoil, as well as tech¬nical momentum indicators and central bank purchases, remain structurally supportive for gold. Gold is attractive on a standalone basis and any setback would be an inter¬esting opportunity from a portfolio perspective.

Macroeconomic environment

The disinflationary dynamics the global economy has been enjoying since the inflation peak in 2022 led to a sigh of relief clearly visible in the performance of financial markets. Nevertheless, monetary policy is still extraordinarily tight, reflecting the central banks’ ambition to not only slow inflation, but also ultimately meet their goal of price stability without risk of immediately flaring up again. Against this backdrop we analyse whether today’s monetary policy restrictiveness degree looks overdone relative to the "still-too-high-but-slowly-slowing" inflation landscape, and what monetary policy actions can be expected over the further course of 2024.

Investment strategy

In this House View edition we take a closer look on our Strategic Asset Allocation (SAA), which we have updated this month. Our core beliefs are reflected in our SAA: (i) long-term thinking; (ii) importance of active management; (iii) diversification; (iv) use of alternatives to generate outperformance, but also to increase diversification; (v) creation of a robust base-case view; (vi) use of robust portfolio optimisation, including the definition of alternative scenarios.

Equity strategy

With the expected end of the global industrial recession and the earnings recession, new opportunities are emerging. Until now, growth companies have dominated in terms of solid earnings growth, which has been a "rare commodity" and has been rewarded accordingly with good performance and valuation premiums. As the expected earnings outlook for the broad market improves, earnings growth will also become available at lower valuation multiples. Value stocks should then offer catch-up potential. For example, we consider high-quality banks to be beneficiaries of "higher interest rates for longer" and upgrade the financial sector. In contrast, we are downgrading the con¬sumer staples sector. In general, in the current environment, "producers" appear to be more interesting than "consumer sectors". In this respect, the energy and mining sectors stand out as favourably valued producers ("value").

Fixed-income strategy

The past few weeks have seen a flurry of central bank meetings, with surprises such as the Bank of Japan’s historic move to abandon its negative interest rate policy and the Swiss National Bank’s first rate cut among the major western central banks. Market forecasts for rate hikes are volatile, but we expect the first cuts by the Fed and the ECB by the end of the second quarter. Our adjusted forecasts for 2024 put the anticipated monetary policy easing by the Fed at 75 basis points and 100 basis points by the ECB, sticking with a soft-landing scenario. On the back of our lowered recession probability, we raise our preference for high yield to "Neutral", as we expect the attractive absolute yields to provide a sufficient buffer for the expected moderate widening of credit spreads.


Building on the initial concepts surrounding gold as a safe-haven investment, we delve deeper into the technical and economic foundations that suggest gold not only serves as a stable investment in times of geopolitical tension but also has growth potential, buoyed by momentum and the prospect of interest rate cuts by the Federal Reserve.

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