November was dominated by AI and credit risks. However, we see no trend reversal and are using market pullbacks to increase equity exposure. The US Fed is likely to cut rates despite a robust economy, and our sentiment indicators are delivering buy signals – the year-end rally in real assets can begin.
Text: Nicola Grass
In the medium term, we continue to expect stable returns from government bonds (with the exception of Switzerland), as yields are likely to decline. At the same time, solid government budgets should prevent a significant withdrawal of investors. Duration is expected to pay off. However, in the short term, we see little reason for US yields, for example, to fall significantly below 4% before year-end. Tactical opportunities are better in riskier assets, which is why we are slightly reducing our strong overweight in global government bonds. Our favourites in the bond space remain emerging market and convertible bonds.
Our barbell strategy with tech and pharma has proven effective once again, as the underperformance of tech was offset by the strong performance of pharma. Despite the correction, economic conditions, earnings growth, and financial conditions remain favourable. Additionally, sentiment has now become very cautious (see chart). Volatility has risen sharply, and there has been significant buying of put options. We expect the US Fed to cut rates in December and anticipate a year-end rally. Accordingly, we are adding to our global equity positions, while emerging markets remain our favourite for 2026. As a result, we are now 2% overweight in equities.
In the alternatives space, we are making adjustments and moving back to an overweight position in gold. Gold has remained surprisingly stable despite a stronger dollar and peace talks in the Ukraine conflict. USD 4,000 per ounce appears to be a strong support level. Medium-term trends such as central bank purchases, de-dollarisation, and high government debt continue to favour gold. Conversely, we still assess the outlook for other commodities as moderate.
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