After the cut

Macroeconomic update for October 2024

The month of September largely revolved around the US Federal Reserve’s rate cut decision and investors’ expectations for the size of the reduction (25 or 50 basis points) – and, more importantly, the path ahead. The vast majority of investors continue to believe a soft landing can be achieved; so, no recession after the first rate cut. This has, however, been a rare accomplishment in the last four decades. In a context of an uncertain economic environment and the looming US presidential election, which tends to fuel volatility, what is the Multi Asset team’s take, and how are they approaching asset allocation?

Key Takeaways

1. The path ahead
   While concerns about inflation now seem to have taken a back seat, we believe the weakening growth outlook should be approached with caution.
2. Under pressure
   key leading economic indicators remain under pressure, August employment data fell short of expectations, and businesses sentiment is increasingly clouded by concerns over future sales.
3. Revising the script
   The Vontobel Investment Committee reduced its overall equity allocation to neutral from overweight, moving cash to neutral from underweight.

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