LGT Private Banking House View

May 2024 - in a nutshell

Geopolitical tensions, robust US growth, rising oil prices and stubborn inflation are pushing equity and bond markets into negative territory for 2024. We are temporarily downgrading US equities to "Underweight" and reducing our preference for ILS investments to "Underweight".

Gérald Moser, CIO & Head Investment Services Europe
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HouseView May 2024
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Macroeconomic environment

The US economy continues to show its robust side in terms of growth, and the first quarter of 2024 brought largely positive news on economic activity. Encouragingly, all demand drivers - consumer spending, investment, government demand and foreign trade - are contributing positively, and fears of a US recession in 2024 have receded sharply. The resurgence of US inflation alone is causing some concern that a "high-for-longer" interest rate path could become an increasing hurdle for the widespread optimism on financial markets.

Investment strategy

A cocktail of geopolitical tensions, resilient US growth, rising oil prices and sticky inflation have all contributed to derailing equity markets and pushing fixed-income markets further into negative territory for 2024. While the Fed’s initial reassessment of its rate path was digestible for the market, we have now reached a level where higher rates are once again too high a hurdle for equity markets. For this reason, we have decided to move to a tactical "Underweight" in equities as a short-term move to reflect the likely challenge for equities in the coming weeks. We have also moved to "Underweight" in insurance-linked securities, as we believe the risk of summer catastrophes is at its highest and the combination of lower premiums and higher risks makes this asset class tactically less attractive.

Equity strategy

In the year to date, equity markets have mainly celebrated the resilience of the US economy and an expected end to the recession in the manufacturing sector, while monetary policy has somewhat faded from the investor’s view. With the rise in US interest rates back into the "psychological danger zone" of 4.5-5.0%, the interest rate sensitivity of equity markets is also rising again. This means that smaller and medium-sized companies in particular, those with a low balance sheet quality, but also companies with above-average valuations are once again increasingly confronted with the gravitational force of interest rates. Now that the US stock market has led the rally to date, and both investor sentiment and valuations have visibly moved ahead of a broad-based, solid earnings recovery, we are temporarily downgrading US equities to "Underweight" for tactical reasons. 

Fixed-income strategy

Persistently sticky inflation in the US does not justify a pre-emptive first interest rate cut in the short term, which is why we have lowered our rate cut assumptions for 2024. Our stance is slightly more dovish than the market consensus, with the first rate cut expected in July 2024. Conversely, we remain confident that the macroeconomic picture in the euro area will allow the cycle to start already in June. Overall, the ECB’s rate cycle is likely to be faster, increasing the likelihood of policy divergence between the two central banks.

Gold strategy

Based on our analysis, we believe that the rally in gold prices will be coming to a temporary halt due to the Fed’s slower than expected rate cut cycle. While gold has traditionally been a safe haven during geopolitical turmoil, its recent appeal has been driven by factors beyond this status, mainly by technical factors and central bank demand. Going forward, higher interest rates and a strong US dollar contribute to a less favourable investment environment for gold. Caution is advised against overly optimistic expectations from current levels. In view of the above, we are taking profits on our bullish gold investment idea (published on 20 March 2024).


The burgeoning capacity in the Insurance-Linked Securities (ILS) market, reaching a staggering USD 100 billion in 2023, alongside a record issuance of catastrophe bonds, raises concerns regarding potential market saturation. This surge in capacity typically exerts downward pressure on premiums, as an influx of capital competes for the same level of risk. This phenomenon could diminish the attractiveness of ILS investments, as returns may no longer adequately compensate for the associated risks.  We have therefore decided to implement a slight "Underweight" in ILS.

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