For global equity markets, the war in Iran is over, and driven by the US stock market we are already back at an all-time high. The focus has shifted away from the Strait of Hormuz towards corporate earnings, which are above all driven by AI (+23% for US companies in Q1 year-on-year). Furthermore, we expect a looser monetary policy than the consensus. That is why our asset allocation remains overweight in equities, although this is somewhat less pronounced after this very strong rebound and given the vulnerabilities in the Middle East.
Political stock markets have short legs – and this market adage has once again been impressively confirmed. After equity markets corrected by around 10% in March, we were already back at a new all‑time high less than a month later. The willingness of the three parties involved to de‑escalate appears to have been sufficient for equity investors, even though the Strait of Hormuz remains practically closed and the oil price is still trading above USD 100 after two months. The focus has already shifted back to other topics, such as artificial intelligence and the massive investment in data centres. Semiconductor stocks, for instance, gained almost 50% in April (see chart). A certain degree of euphoria seems to be building again here, and the sector is now heavily overbought. Overall, risk appetite has risen sharply and call volumes are significantly higher than put volumes. We are therefore trimming momentum in equities somewhat again for May, and with it our exposure to the red‑hot theme of electrification.
In the first phase of the Iran war, the surge in oil prices triggered fears of inflation. As a result, interest rate hikes were priced in for almost all central banks. This panic has now eased somewhat and inflation expectations have fallen. For the Fed, a rate cut towards the end of the year is once again being priced in. This is what we had anticipated and why we increased duration at the end of March. Now, however, concerns about growth are beginning to emerge, and our economists have once again revised down their GDP forecast for the US. Leading indicators have so far remained surprisingly robust, and a recession still appears unlikely. For equity markets, this would not necessarily be negative, as weaker growth makes further rate cuts more likely. In combination with strong corporate earnings, this continues to argue in favour of equities.
Outside equities, however, we are acting rather cautiously. In bonds, for example, we remain heavily underweight in credit and are instead overweight in global government bonds with longer duration. We see significantly greater potential for price gains from falling yields outside Switzerland. We hold real estate and commodities at neutral weight and continue to favour catastrophe bonds. We are now also neutrally weighted in gold. In currencies, we are no longer overweight in JPY and AUD, but only in the Swiss franc. Thanks to its low level of government debt and comparatively low inflation, the franc remains in demand and is, in our view, the best safe haven.
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