Summary points

  • The global economy is demonstrating resilience, especially for the US, China, and emerging markets. The risk of a global recession has diminished, with emerging markets outperforming advanced economies.
  • Equity markets hit new highs in Q2 2024, bolstered by strong economic fundamentals and growing investor confidence.
  • Persistently high inflation led to diminished expectations for a significant Fed easing cycle, with markets now anticipating one to two rate cuts in 2024.
  • In June, the ECB reduced interest rates by 25 basis points due to continued disinflationary process and weaker-than-expected economic data.
  • China’s GDP grew by 5.3% year-on-year in Q1, exceeding market expectations of 5.0%. Real estate investment in April 2024 declined by 9.8%, highlighting ongoing challenges in the property market.
  • Conclusion: Given the absence of an imminent severe recession, we maintain our positive bias on risky assets. However, we are prepared to reduce our equity exposure if interest rates rise again, or economic growth slows. In a low-growth environment, the divergence among companies and sectors increases, necessitating active management. We continue to favour credit investments, particularly focusing on loans and non-cyclical short-term high-yield bonds offering yields of 7-9%. While we maintain a positive bias on equities, we prefer an absolute return strategy over a traditional relative value approach in the current market conditions.

We invite you to review our complete 3rd quarter 2024 investment letter, which includes a more detailed look at the regional macroeconomic backdrop, market consensus forecasts, and more.

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Follow the link below to see our previous 2023 quarterly investment letters:

Q 1 2024

Q2 2024