And now for something completely different

Geopolitical easing

Markets have been digesting a sequence of events, including the largest ever IPO, the announcement of a pipeline of massive AI-linked issuance and the direction of monetary policy. The US Federal Reserve held interest rates steady but left the door open to rate hikes. Global equity markets continued to mark new highs in June. Sustained earnings growth is a key support factor for equities and, in our view, also crucial for ongoing equity market strength. Given the supportive economic backdrop, we currently maintain our positive bias in equities.

Key takeaways

• Global equity markets continued to mark new highs in June. Sustained earnings growth is a key support factor for equities and, in our view, also crucial for ongoing equity market strength. Companies are still finding potential for margin expansion. From a macro perspective, global growth continues to hold up well, despite elevated geopolitical uncertainty. Given the supportive economic backdrop, we currently maintain our positive bias in equities.
  
  
• We believe the global economy is in sufficiently strong shape to absorb these headwinds. That’s because on the one hand, the US labor market has started to show signs of reacceleration, while the positive impacts of AI-related capex are poised to provide additional tailwinds and elsewhere, notably in Europe, we still have the tailwind from fiscal spending. The US-Iran deal is also likely to ease one of the main drivers of recent inflation, namely energy inflation. That’s why we believe central banks may not need to tighten policy as aggressively as some may fear.
• Although a positive undercurrent in the global economy helps corporate earnings growth and is a key factor in our bias towards equities, the world remains in flux. Geopolitical risks may ease and accelerate again in time, and for that reason a well-diversified portfolio remains key in our view. We continue to maintain an overweight in gold for instance. Our positive view on gold remains intact. In our view, ongoing geopolitical and macroeconomic uncertainties, along with continued demand from central banks, particularly in emerging markets, remains supportive factors for gold, although market conditions and outcomes may vary.