LGT Private Banking House View

July 2024 - in a nutshell

The solid but slowing growth environment should continue for the time being, albeit with regional differences, and the risk of recession seems to have been pushed further out. The equity market offers a more attractive risk/reward profile than the credit market, with the US stock market in particular enjoying solid momentum. We have agreed on a "risk reversal" approach in fixed income, reducing allocations to emerging market bonds while increasing the equity allocation to a slight overweight position via US stocks.

Gérald Moser, CIO & Head Investment Services Europe
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Market Compass
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Macroeconomic environment

Global growth is adjusting to changing dynamics. Slowing US private demand is met by a rebound in global manufacturing and a brighter outlook for the euro area. Our growth outlook for both regions remains positive. The economic soft-landing scenario is becoming increasingly likely as the private sector shrugs off elevated central bank interest rates and gradually retreating inflation rates are lifting real wages and purchasing power.

Investment strategy

A positive equity momentum is supported by a benign macro environment. Recent economic news indicates a reduction in near-term macro risks, pushing the risk of recession further out, particularly in the US. The Federal Reserve is expected to cut its key policy rate later in 2024. Given this scenario, equity risk is preferred over credit risk, with expectations of continued equity growth. The overall tactical equity position is shifted to "Overweight", with a preference for US equities. At the same time we have reduced fixed income to an "Underweight" position, while our strategic weighting in government bonds is maintained. Gold is moved to a tactical "Overweight" position as a hedge against geopolitical risks and in light of additional supportive factors.

Equity strategy

The US "supertanker" is now growing at a slower but more controlled pace, which is reflected in slightly lower interest rates. The recovery in the manufacturing sector is continuing and enabling a broad-based recovery in earnings growth, while the sum of this year’s share buyback programs is likely to approach USD 1 trillion. The now late-cycle environment is still lacking a revival in merger and acquisition activity. The broad market, as measured by the equally weighted S&P 500, has performed modestly over the course of the year and does not appear to be overly expensive. We believe that the potential for rotation and sustained momentum in the US equity market has not been fully exploited and have tactically upgraded US equities to "Overweight". In our sector strategy, we are closing the "Underweight" position in the industrial sector, while downgrading the financial sector to "Underweight". Banks, in particular, can look back on a strong 12-month performance, helped by continuously falling credit default risks. Credit risks are unlikely to get much better and we recommend taking profits.

Fixed-income strategy

We are reducing our allocation to hard currency emerging market bonds to "Underweight", given their solid performance so far this year and the continued spread tightening over recent quarters. In the credit sector, we maintain our preference for quality due to high valuation levels. We believe this is the ideal time to shift into higher-quality corporate bonds where appropriate. 


Gold has recently achieved record highs, underpinned by a confluence of factors that make it a compelling investment in today’s climate. This surge is attributed to robust central-bank purchases, i.e., significant demand from Asia, particularly China, and the persistent geopolitical tensions in Ukraine and the Middle East. Beyond its traditional role as a hedge against political and geopolitical turmoil, gold’s prospects are further buoyed by economic factors that suggest it is not only a stable investment, but one with significant growth potential, especially given the inflationary policies potentially emerging from a renewed Trump administration.

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