LGT Private Banking House View

June 2025 - in a nutshell

Market sentiment remains characterised by a high level of uncertainty. As investors try to grasp the latest moves in the trade conflict, the global economic outlook is deteriorating. Tensions surrounding US President Trump’s ongoing trade war are translating into slowing growth and weakening consumer momentum, while high tariffs weigh on inflation and investment. 

  • Date
  • Auteur Gérald Moser, CIO & Head Investment Services Europe
  • Temps de lecture 7 minutes

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Against this backdrop, we remain "Underweight" in global equities. We are keeping our "Underweight" in US stocks due to limited return potential and are downgrading Swiss stocks to "Neutral" as the important pharma sector faces challenges regarding drug pricing by the US government. However, we acknowledge some signs of a deescalation in the trade war and are neutralising our previous "Underweight" for emerging market equities. 

In the fixed income space, we are carefully increasing the risk reflected in our investment strategy. We are neutralising global emerging market bonds and global high-yield bonds from previously "Underweight", leading to an overall "Neutral" position in fixed income. 

Gold remains a pillar in uncertain times and a counterbalance to dollar-centric risks. The precious metal’s role as a hedge against systemic volatility is emphasised by our newly set six-month target of USD 3250.

Macroeconomic environment

The global economic outlook is darkening as growth slows and geopolitical tensions rise. In the US, consumer momentum weakens, and high tariffs weigh on inflation and investment. The eurozone shows mixed signals, with a modest recovery in industry but continued low growth. China’s sluggish transition and global uncertainty also weigh on the global growth outlook.

Investment strategy

The Investment Committee has adjusted its portfolio strategy due to reduced US-China trade tensions and a US-UK trade agreement, cautiously increasing our risk exposure by moving to a "Neutral" position in global emerging market and high-yield bonds, resulting in an overall "Neutral" fixed income stance. Despite recent gains, our global equity position remains "Underweight" due to limited return potential, particularly in US equities due to high valuations and negative earnings revisions. 

Equity strategy

The recent rally in the US stock market, fuelled by the deescalation in the trade war, has pushed the S&P 500 to price and valuation levels higher than those before "Liberation Day". Meanwhile, uncertainties related to the current tariff regime in the US remain elevated in multiple respects. This necessitates a correspondingly higher equity risk premium, which, however, appears very low in the historical context given the current valuation and interest rate levels. We maintain an "Underweight" on US stocks. Meanwhile, Swiss stocks have outperformed the world equity index so far this year, especially in Swiss francs. However, the pharma sector faces new challenges regarding drug pricing by the US government, limiting its price potential. We are downgrading the health care sector, and given its significance for the domestic market, Swiss equity as a whole, to "Neutral". Conversely, we are upgrading EM equity, as the recent deescalation in the trade war brings a moderate improvement in global economic and earnings expectations for emerging markets. With a 30% valuation discount compared to the world equity index, emerging market stocks offer a reasonable safety cushion to be upgraded back to "Neutral". Finally, we are upgrading the financial sector, focusing on banks, to "Attractive" Deregulation efforts in the US are expected to ease capital requirements, freeing up new capital for future lending. The sector is attractively valued and less affected by the trade war.

Fixed-income strategy

Following turbulence in April, bond markets have stabilised somewhat, with signs of deescalation, particularly regarding trade policy. Nevertheless, the environment remains characterised by a high level of uncertainty. Leading indicators suggest a potential slowdown, and structural risks such as the US budget deficit and rising long-term interest rates persist. Against this backdrop, we are adjusting our positioning. The lower probability of a recession means we are weakening our defensive bias in favour of a more neutral stance. We are reducing the attractiveness of government bonds to "Neutral", while also upgrading emerging market bonds to "Neutral".

Currency and gold strategy

The US dollar appears poised for a modest recovery, supported by higher yields relative to the euro and the US’ stronger productivity and deeper capital markets. However, ongoing trade-policy uncertainties, elevated tariffs, and potential challenges to the Fed’s independence cast doubt on US exceptionalism, underscoring risks to the dollar’s safe-haven status. In this context, gold remains a critical diversifier, backed by central-bank demand and broad industrial usage. Despite near-term USD firmness potentially weighing on gold prices, the metal’s role as a hedge against systemic volatility is emphasised by our newly set target of USD 3250 (6-month), and USD 3600 (12-month).

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